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Morning Peter,

The 'speed' of the bounce suggests short covering rather than new longs. If the bounce continues past, lets say point P, that's where we see new buyers being sucked back in.

Or potentially a date, being 2 April and Trump's Tariffs?

So I will be starting to sell long positions at about point P. For example my TSLA position I'll sell at $290/$300 which could be this week.

The economy is starting to break:

In the aggregate, American households' finances are looking just fine. But nobody lives in the aggregate, and there is evidence of rising financial strain for a meaningful slice of the population. The big picture: Cracks have appeared in many household balance sheets over the last year and widened further in the final months of 2024, leaving some Americans more vulnerable to any disruptions that are to come. But it has not been obvious from top-line numbers, as disproportionately affluent families have benefited from a surging stock market, rising home prices, and fixed-rate mortgage debt held over from the low-interest environment of three years ago. What they're saying: "The number of people falling behind on debt payments has risen sharply, even though households collectively built up their holdings of liquid assets" at the end of last year, wrote Samuel Tombs, chief U.S. economist at Pantheon Macro, in a new note. By the numbers: The net worth of American households — the cumulative value of their assets minus debts — edged up to $160.3 trillionin the fourth quarter, up 9.3% from a year earlier. Household debt service as a share of disposable personal income was at 11.3% in Q4, below its pre-pandemic levels, per Federal Reserve data. Yes, but: The share of outstanding credit card debt that is more than 90 days delinquent rose to 11.4% in the fourth quarter, per New York Fed data, the highest in 13 years (it hovered around 8% in the years before the pandemic). Indeed, in the last two decades, it has only been higher during and immediately following the 2008 Great Recession. Looking forward, consumers anticipate further difficulty handling their debts. The average odds people placed that they won't be able to make a minimum debt payment in the next three months rose to 14.6%, the highest since early in the pandemic and well above 2019 levels. Between the lines: Those stresses for borrowers have occurred against a backdrop of rising asset prices and a strong job market. The numbers could shoot higher if federal cutbacks and trade wars generate higher unemployment or further wobbles in financial markets. The end of Biden-era student loan relief efforts could further stress some borrowers, Tombs argued. Further Fed interest rate cuts could ease some financial pressure on households straining under debts, but still-elevated inflation may constrain the central bank's room to maneuver. The bottom line: If you carry stocks, own a house, and have a low-rate home mortgage, there's a good chance you've gotten richer over the last year. If you rent your home, live paycheck to paycheck, and have credit card debt, things look more worrisome.

[ATTACH=full]196126[/ATTACH] Data: The Conference Board. Chart: Axios Visuals For the fourth straight month, consumer confidence — as measured by the Conference Board's index — dropped, alongside rising fears about inflation and tariffs. Why it matters: It is safe to say the receding number is no blip. President Trump now faces the same economic discontent that plagued the Biden administration. Consumers' pessimism is raising fears about the economy's health, even as official government indicators suggest healthy conditions. By the numbers: The Conference Board's Consumer Confidence Index fell by more than 7 points in March to 92.9. A sub-index that measures confidence in the short-term outlook for income, business and employment conditions dropped almost 10 points to the lowest level in 12 years. Just one sub-index improved, though only slightly: Consumers' assessment of the current labor market ticked up. The intrigue: Add this to the sign of weakening household balance sheets that we note above: For the first time in months, the group's survey showed weaker expectations about household income. "[C]onsumers' optimism about future income—which had held up quite strongly in the past few months—largely vanished, suggesting worries about the economy and labor market have started to spread into consumers' assessments of their personal situations," Stephanie Guichard, a senior economist at the Conference Board, wrote in a release. The big picture: The Conference Board said consumers' write-in responses indicated that Trump policies, supportive or not, far outweighed other factors affecting Americans' view of the economy. What to watch: Average inflation expectations for the year ahead rose again, to 6.2% from 5.8% the prior month, "as consumers remained concerned about high prices for key household staples like eggs and the impact of tariffs," Guichard wrote.

Oil News:

As London-based energy major Shell (LON:SHEL) issued its 2024 annual report ahead of this year’s Annual General Meeting, its general pivot back to fossil energy set the stage for other companies to follow suit.

- In line with higher shareholder returns in the US, Shell hiked its distribution target to 40-50% of operations cash flow, up from the current 30%-40% range, whilst also trimming its investment budget by $2-3 billion to a $20-22 billion through 2028.

- Pledging to maintain ‘material’ oil production beyond 2030, sustaining output around the current level of 1.4 million b/d, Shell will seek to maximize gas production, aiming for 4-5% annual increases in LNG sales in the 2026-2030 period.

- It seems that the new benchmark for low-carbon investment amongst oil majors will be around 10% of capital employed, well below Shell’s 2022 peak of allocating a third of their total capital expenditure on renewables.

Market Movers

- UK oil major BP (NYSE:BP) has agreed to sell its 25% stake in the Trans-Anatolian Pipeline that carries Azerbaijani gas through Turkey to US asset management firm Apollo (NYSE:APO) for $1 billion.

- London-based Africa explorer Tullow Oil (LON:TLW) agreed to sell its entire working interests in Gabon for $300 million in cash to the Gabon Oil Company, as it continues to be weighed down by debt.

- Mexico’s state oil firm Pemex is reportedly in talks with billionaire Carlos Slim to jointly operate the 800 MMbbls Zama offshore field and the country’s largest gas field Ixachi, ceding operator control in a rare move by the Mexican NOC.

Tuesday, March 25, 2025

Donald Trump has been concurrently the biggest oil bear and oil bull out there, and this week has driven bullish sentiment. U.S. sanctions on Venezuela, effectively punishing any country that is buying PDVSA barrels except for refiners in the United States, coincided with a one-month extension of Chevron’s mandate to wind down operations in the country. With market participants wary of less heavy oil in the market, ICE Brent futures jumped above $73 per barrel again.

Trump Slams Tariffs on Buyers of Venezuelan Oil. The White House introduced a 25% tariff for any country that buys oil or gas from Venezuela in case of any trades made with the United States, impacting China as the Asian nation accounted for 55% of Venezuela’s 500,000 b/d exports lately.

US Mulls Taking Over Ukraine’s Nuclear Plants. US Energy Secretary Chris Wright stated that American companies could operate Ukraine’s power plants ‘with very little problem’, arguing that such an arrangement would be the best protection of the country’s energy infrastructure.

Russia-Ukraine Ceasefire to Include Revived Grain Deal. As Russian and US officials met in Saudi Arabia to discuss a potential ceasefire in Ukraine, the Black Sea grain deal could see a revival after the initiative ended in 2023, potentially bringing more Ukrainian agricultural exports to the market.

Iraq Accuses Iran of Forging Documents. Iraq’s oil minister Hayan Abdul Ghani alleged that Iranian oil tankers have been using forged Iraqi shipping documents, rejecting any Iraqi implication in recently detained tankers, as Baghdad remains under US pressure to cut links with Tehran.

Weak Asian Demand Weighs on LNG Prices. The average LNG price for May delivery into Northeast Asia dipped to $13.5 per mmBtu, a three-month low and some $0.50-0.60/mmBtu higher than European delivered prices, as mild weather forecasts and weak Chinese demand cap the upside.

Trading Majors Splash the Cash on Aluminium. Global trading giants Vitol and Gunvor have been ramping up their long positions in physically deliverable LME aluminium contracts, as both the February and March contracts saw one trading entity hold at least 30% of open interest upon expiry.

OPEC+ Mulls Continuation of Output Hikes. OPEC+ countries will most probably continue raising oil output for a second consecutive month as part of the oil group gradually unwinding its production cuts, boosting global production by another 135,000 b/d after April is set to grow by 138,000 b/d.

Glencore Commits to Coal Production Cuts. As benchmark Australian Newcastle coal futures plunged to $97 per metric tonne, down 20% since the start of the year, the world’s largest coal producer Glencore (LON:GLEN) stated that it would cut output by 5-10 million tonnes in 2025.

Antimony Soars on Chinese Export Controls. Chinese antimony prices continue to skyrocket after 99.85% antimony metal started to trade at ¥250,000 per metric tonne ($35,000/mt), up 70% since early February, as Beijing’s export restrictions limited exports to a mere 20 tonnes in January and February.

Indian Refiners Rush Back to Russian Crude. Indian refiners are poised to cut back on spot tenders after offers of Russian crude have rebounded to pre-January levels and March imports are set to average 1.8 million b/d, with most deliveries taking place on non-sanctioned tankers.

Copper Bulls Keep on Loving the Tariffs. Comex copper futures surged to an all-time high of $5.20 per pound this week, further buoyed by Glencore’s mining woes in Chile, as the markets bracing for a Trump tariff impact with an unprecedented 500,000 tonnes of copper sailing now towards the US.

East Africa Eyes Exploration Boost. The East African government of Kenya is planning to auction at least 10 exploration licenses in its first oil licensing round, opening up the bidding process in September 2025, concurrent to auctions taking place this year in Uganda and Tanzania.

Tesla Sales Collapse in Europe. Sales of top US electric vehicle producer Tesla (NASDAQ:TSLA) in Europe have been 43% lower so far in 2025, commanding only 10% of the BEV market in February with total monthly sales of less than 17,000 units, losing market share to cheaper Chinese EVs.

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With the major's pulling back on green, nuclear back on the table?

Nobody has ever questioned Donald Trump’s ability to set the agenda with a telling phrase. Suddenly, market conversation is dominated by Liberation Day, the name he’s given to his announcement of reciprocal tariffs on April 2. A count of news stories from all sources on the Bloomberg terminal shows an explosion of interest:

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While Trump means the phrase to refer to the imminent liberation of the US from what he calls an unfair world trade order, markets expect to be liberated from the dangerous threat of heavy global tariffs. As Deutsche Bank’s regular survey of traders shows, they were confident that Trump’s tariff bark would be worse than his bite back in December. They’re taking the threat of tariffs much more seriously now, but still think the net effect will be less severe than he trailed during the campaign (scored as a seven for the purposes of the exercise):

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Liberation Day, for all that Trump is building it up, could reassure investors that they had it right the first time. Bloomberg’s weekend story that the administration would opt for a “targeted push” was interpreted as meaning it would retreat — even if Monday’s tariff pronouncements were a little more alarming. So what exactly is the idea behind the reciprocal tariffs that will liberate us?

Reciprocity

The idea of reciprocity is simple — even “beautiful,” as the president puts it. Compared to the various plans Trump has aired for blanket tariffs on particular sectors, like those in place on steel and aluminum, they are also far lighter, creating less disruption for the economy and generating much less revenue for the Treasury. Strategas Research Partners’ Dan Clifton estimates sectoral tariffs are roughly twice the size of likely reciprocal tariffs. That’s because, as revealed in UBS research that Points of Return covered earlier, the US is not that hard done by, and its main trading partners’ tariffs are already reciprocal. In general, they’re the countries with which the US already has free trade agreements.

Further, reciprocity is difficult, as products can be subdivided any number of ways. Morgan Stanley’s economics team comments that “to define reciprocity at a product or sector level requires excruciating details not only around product classification but also how products are treated by domestic policy.” They are also further subject to override or amplification by the president after companies and countries have lobbied him. “All we care about is jobs,” Trump said Monday. “We have a lot of people coming in.”

The administration must also convince investors and businesses alike that these tariffs won’t hurt the US. “Countries that sell to the United States are inflexible. They’ve only got the United States to sell to,” Stephen Miran — chairman of the Council of Economic Advisers — told Bloomberg TV on Monday. “So they’re the ones who bear the burden of these tariffs.” This is a good point, but may prove to be overstated. US trading partners are already scurrying to find alternative markets, and to rebuild their own capacity. The European attempt to rearm is only the most spectacular example. But as a broad rule, US tariffs should indeed hurt others more than they hurt the US.

A Reserved Currency

The dollar is exceptional under MAGA, but not in a good way, and is down by about 4% for the year. At one point, it shed all its post-election gains. Tariff uncertainty is doubtless part of this, but even before “Liberation Day,” it’s legitimate to question whether the weakness is overdone. As Deutsche Bank’s Tim Baker points out, the services purchasing managers index or PMI has rebounded, and the apprehension begins to look overplayed. In part, it’s a reaction to improved growth prospects elsewhere. This chart shows that gross domestic product accelerated in the second half of last year in most developed economies:

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Tariffs plainly also a play part, and the foreign exchange market loves the idea that they will be rather more targeted. That’s provided some relief for the greenback, after its lowest sessions since October:

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Another key point is that analysts still have the first Trump term as a template. Oxford Economics’ global macro strategist Javier Corominas draws parallels between the dollar’s current performance and Trump 1.0. It suggests the weakness we are seeing is nothing new:

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But it’s too simplistic to expect everything to check out and proceed on the 2017 path. That would water down the historic significance of Germany’s fiscal splurge, which could add two percentage points to growth over the next four years. How much could this impact the euro? Corominas argues that Germany’s fiscal sea change is already fully priced. He offers this chart to make his case:

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What does the change in yields tell us? Corominas notes that the euro has overshot the relative move in yields over the last month. That may be justified, but he says the implication that the euro will strengthen further doesn’t necessarily follow:

Essentially, he holds that Germany’s release of the debt brake won’t fuel inflation, and the ECB will likely cut twice more this year. That could snuff out optimism for the euro. And of course, Trump could impose a blanket levy on the euro zone, which would be dollar-bullish. But Germany’s outsized fiscal expansion might allow it to deal with the US approach. Deutsche Bank’s global head of FX research, George Saravelos, says front-loaded fiscal policy would offset the blow from tariffs by generating a muted knock-on impact on growth. That would allow the euro to withstand the might of a resurging dollar, at least for now. But there’s unlikely to be much clarity on this from Liberation Day.

On the face of it, there’s just been a “biblical rotation” — to borrow the phrase of MI2 Research’s Julian Brigden — out of the US and into stocks everywhere else, particularly Europe. That leaves investors in no man’s land, and US stocks are bouncing. How seriously should we take that bounce? There’s a decent argument that this is the beginning of a return to US exceptionalism. This correction, very unusually, has played out with the VIX volatility index never exceeding 30. There’s nothing disorderly or panicked going on:

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Credit markets — central to a more significant downtrend — are also relatively unconcerned. Bloomberg’s aggregate indexes for investment-grade and high-yield bonds have seen their spreads over equivalent Treasuries rise this month, but they did so from a very low level. Even now, this is nothing like the angst of the regional banking crisis two years ago, or last summer’s carry trade unwind:

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Sentiment indicators suggest that it’s time to buy US stocks. The proportion of retail investors calling themselves bears exceeds self-described bulls to an extent that in the past always preceded a big rally. When people are this bearish, it’s generally time to buy:

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US macro data has surprised negatively of late, while European data have come in better than expected. This is illustrated by the Citi Economic Surprise indexes and would, again, justify a one-time correction for the US indexes, but not a major sea change:

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And then there’s the fact that the US market looked implausibly exceptional. Its outperformance, even if the Magnificent Seven tech platforms are excluded, was phenomenal. What’s just happened is a big correction, but it hasn’t clearly set up a new trend:

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That led Morgan Stanley’s chief US equity strategist, Mike Wilson, to contend that US underperformance was “fairly benign in a longer term context,” with the S&P 500’s relative strength returning to the “long-term trend line that has held for the past 15 years.”

Wilson added that US earnings have been revised downward over the last two months to a far greater extent than in Europe, in large part thanks to the strong dollar at the end of last year, which weakens US foreign profits. That’s another reason for the US to bounce back, as the weakening dollar should help US earnings in this quarter.

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jog on

duc