A (2:50)

Okay, this week we're going to be getting inflation data from Amongst others the U.S. germany, India and Japan. And today we've already had China's numbers, haven't we?

B (3:00)

China's producer prices rose 2.8% year on year in April, now the fastest pace since the pandemic. While consumer inflation unexpectedly also climbed 1.2%. Analysts had expected a rise of only 1%. And over the weekend, China's trade data point to strengthening external demand. Export jumped 40%, 14%, but also imports rose more than 25%. Now one can say strong figures considering the geopolitical and logistical disruptions.

A (3:32)

And in Europe, the tone was more cautious last week. But the Euro Stoxx 50 still ended the week up 1 1/2 percent. We saw German defence contractor Rheinmetall plunging 7% on disappointing Q1 results.

B (3:46)

Yes. So European equity markets finished broadly lower on Friday after US President Donald Trump threatened much higher tarif against the EU if no final agreement is reached. Although this week the focus of the US administration is likely to be on Asia.

A (4:03)

And Why is that?

B (4:04)

U.S. treasury Secretary Scott Bessant begins a three day visit to Japan. So that's starting today with attention on the weak yen and potential US support for currency intervention. And US President Trump will travel to Beijing to meet President Xi, highlighting relations between the two leading geopolitical and artificial intelligence superpowers. Now staying with geopolitics. Today is the final day of the three day ceasefire in the Russia, Ukraine war. In the uk the government will present its new legislative agenda in the King's speech on Wednesday, which is receiving extra focus after Labour's election defeat last week. And the week ends with a leadership change at the Federal Reserve as Jay Powell's term concludes and Kevin Ward is expected to take over as chair. We'll have an important Senate vote later today on that.

A (4:59)

Ok, we've already mentioned inflation data releases this week, but what should we be expecting on the corporate side?

B (5:05)

Mike, we're still in the earnings season. Companies reporting include Munich, Re Alibaba, Allianz, Cisco, Siemens and Zurich Insurance. Now the IPO pipeline is also picking up in AI chip maker and Nvidia competitor Cerebra System is set to list in New York this week. Reuters reports Cerebras lifted its IPO price rate from $125 to $160 per share, which it will announce later today. Now, clearly the music is playing in semiconductors right now and I see from

A (5:39)

the screens that European and US equity futures are seen opening flat despite President Trump and Iran rejecting the latest peace proposals to end the conflict.

B (5:48)

Yes, you mentioned at the outset Equity futures do not seem to be too faced by oil marching higher this morning. Brent oil is up over 4%, $205 per barrel. And in other asset classes, gold is down nearly 1%. And the US dollar is starting the week little changed. That's all from me.

A (6:08)

Thank you very much for bringing us a great roundup this morning, Mike.

B (6:11)

Thank you very much for having me, Bernadette.

A (6:17)

Okay, so now it's time to look at markets from a technical perspective. Good morning to you, Mensor.

C (6:21)

Good morning, Bernadette.

A (6:23)

So Mike alluded to it, oil remaining on a roller coaster. What's your view on oil and also oil and gas stocks?

C (6:32)

Yes. So when we look at oil, we think we are here in a topping process. Probably we have seen the highs and oil will not go again above $120. What are the key levels on the downside here we identify US$92. So if US$92 breaks on a closing basis, ideally for two consecutive days, we would probably have to conclude that the peak is in for oil prices and then the target would be around 75, 72 US dollars. Because please remember or you already know as investors that the up move in oil prices was very swift and short. So this means on the downside there is not much support. Interestingly, the oil and gas stocks themselves, they have already peaked, so they peaked already on the 27th of March. And on a relative basis they have seen now a massive underperformance since then. They have underperformed the market in relative terms by 23% since then. And interestingly, they are on a relative basis now lower than the day before the conflict started. So indicating that even if you had perfect foresight for the conflict to start and one day before the conflict started, you would have overweighted oil gas stocks. Today you would be underperforming by about 5 to 7%. The S&P 500.

A (8:01)

Interesting. And also if we take a look at the US Dollar that's remaining in its trading range from last summer. So when will that range end?

C (8:10)

Yes, this is very interesting as well. So very surprising for many investors that we have a war, a spike in oil prices and that the US Dollar is not acting as a safe haven. We think time is running out and probably with the decline in oil prices, the US Dollar will attempt to fall to new lows here below the lows of January. When we look at the US Dollar, it is especially weak against the Swiss franc and emerging market currencies. So therefore we still recommend investors to be short the US Dollar across the board, especially against the Swiss franc and emerging market currencies, which still offer some quite interesting high interest rates, which of course help investors boost their returns.

A (8:59)

And lastly, and Mike alluded to it already, semiconductor stocks are on fire. Are they entering a bubble territory?

C (9:07)

Yes, I think this is the question in everyone's mind. I think it's very interesting to see again that the leading indicator or the leading sector usually is the first one to make a new high even in a crisis. And looking at prices, one could come to the conclusion that it is a bubble. We think it's not a bubble. So we have several indicators which indicate to us that this advances come as a surprise. So you know or you have seen in the past few weeks and months, many investors have tried to bottom fish in software stocks and have been rather cautious on semiconductors. First of all, then nevertheless, if we look ahead and think, yes, what would need to happen that semiconductors enter a bubble here some calculations point to maybe another six months of steady gains. So the worst case for semiconductors in order to complete a bubble or go into bubble territory would be if there is another six months of steady gains in the range of 30 to 50%. And the best case to to avoid a bubble is basically a correction. So let's say if in the next three to six months semiconductors go into consolidation or have a correction of 10 to 15%, this would delay the bubble risk. But for now we recommend investors to stay invested semiconductors and wherever you look, it's basically semiconductors that are driving the gains. It's in the US it's in emerging markets and even in small caps in the US it's semiconductors which are driving this rally and everything else is quite muted.

A (10:57)

Interesting. You've given us lots of food for thought today. Thank you very much for joining the podcast today. Mensour.

C (11:02)

Happy to be here. Thank you, Bernard.

A (11:07)

Well, that brings us to the end of today's show. I hope that you enjoyed it. Thanks again to my guests. Please do come back and join me again tomorrow when I'll be here with more of our experts to keep you in the loop on what's moving markets. Meanwhile, good luck today and in the week ahead and goodbye for now.

D (11:30)

The information and opinions expressed in this podcast constitute marketing material and are not the result of independent financial or investment research. Please refer to www.juliusbear.com legal podcasts for further other important legal.