Junior Finance Analyst, Steno Research

Ulrik Simmelholt

Junior Finance Analyst

Macro and Geopolitical Research House

Steno Research

Steno Research is a new macro and geopolitical research house. We are based out of Copenhagen, Denmark, but have an international team and a strong network of sources and partners around the world. The team is lead by Andreas Steno, previous global head of strategy at Nordea Bank, and Mikkel Rosenvold, former chief consultant in the Danish Ministry of Finance.

Commodities

Gold is a chemical element with the symbol Au (from Latin: aurum) and the atomic number 79. In its purest form, it is a bright, slightly reddish yellow, dense, soft, malleable and ductile metal. Chemically, gold is a transition metal and a group 11 element. It is one of the least reactive chemical elements, and is solid under standard conditions. The metal therefore occurs often in free elemental (native) form, as nuggets or grains, in rocks, in veins and in alluvial deposits. It occurs in a solid solution series with the native element silver (as electrum) and also naturally alloyed with copper and palladium. Less commonly, it occurs in minerals as gold compounds, often with tellurium (gold tellurides).

<ul>
<li>The Drill: Could nuclear be the next Trump bet?</li>
<li>This week’s The Drill examines commodities in the aftermath of Trump’s election, where calm has begun to return as risks were initially overestimated.</li>
<li>Nuclear energy is likely an underappreciated theme in the new Trump administration, while tariff threats appear overblown.</li>
</ul>


The Drill: Could nuclear be the next Trump bet?
This week’s The Drill examines commodities in the aftermath of Trump’s election, where calm has begun to return as risks were initially overestimated.
Nuclear energy is likely an underappreciated theme in the new Trump administration, while tariff threats appear overblown.


The Drill: Commodities post Trump election

Cross Asset Strategy

<ul><li>Before we get to Trump, we need to quickly discuss OPEC and their recent cut in demand forecasts.</li><li>This reduction hints at an unwillingness to increase production in the near future.</li><li>Saudi Arabia is key here, as it holds the largest excess capacity, and a production hike from them could swing the market and send prices below $50 USD in the blink of an eye.</li></ul>

Before we get to Trump, we need to quickly discuss OPEC and their recent cut in demand forecasts.This reduction hints at an unwillingness to increase production in the near future.Saudi Arabia is key here, as it holds the largest excess capacity, and a production hike from them could swing the market and send prices below $50 USD in the blink of an eye.

The Drill: A Look at Trump’s Policy and Their Impacts

Natural gas is a naturally occurring hydrocarbon gas mixture consisting primarily of methane, but commonly including varying amounts of other higher alkanes, and sometimes a small percentage of carbon dioxide, nitrogen, hydrogen sulfide, or helium. It is formed when layers of decomposing plant and animal matter are exposed to intense heat and pressure supplied by existing under the surface of the Earth over millions of years. The energy that the plants originally obtained from the sun is stored in the form of chemical bonds in the gas.

<ul><li>Dutch TTF is trading at its highest YTD price as supply is getting hit on various fronts.</li><li>Firstly, as a consequence of the Houthis shenanigans in the Red Sea, Egypt has now become a net importer of LNG creating extra demand for potential European buying.</li><li>Secondly, Norway has had to do unplanned maintenance on their pips towards Europe along with delayed LNG supply from the US due to weather.</li></ul>

Dutch TTF is trading at its highest YTD price as supply is getting hit on various fronts.Firstly, as a consequence of the Houthis shenanigans in the Red Sea, Egypt has now become a net importer of LNG creating extra demand for potential European buying.Secondly, Norway has had to do unplanned maintenance on their pips towards Europe along with delayed LNG supply from the US due to weather.

The Drill – Time to play the Natural Gas case again?

Crude oil is a naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials. Crude oil can be refined to produce usable products such as gasoline, diesel and various forms of petrochemicals. It is a nonrenewable resource, also known as a fossil fuel, which means that it can't be replaced naturally at the rate we consume it and is therefore a limited resource.

<ul><li>We start in the US where stronger macro prints and Trump’s pollings have shifted narratives around growth and it is admittedly very hard to find reasons to bet on weak growth in the US right now, especially when cyclicals versus defensives in the equity space are indicating ISM manufacturing readings above 55 and crude oil suggesting that we moving into a restocking cycle.</li><li>The anticipated full-on rate-cutting cycle has been abandoned and replaced by the ‘no landing scenario.’ Torsten Slok of Apollo mentioned yesterday that the Fed could opt for a pause in November, which would be more controversial than a cut, in our opinion, especially since a cut has been reasonably well telegraphed.</li><li>Interestingly, this shift isn’t primarily driven by a flare-up in inflation expectations, as oil prices remain muted despite the turmoil in the Middle East.</li></ul>

We start in the US where stronger macro prints and Trump’s pollings have shifted narratives around growth and it is admittedly very hard to find reasons to bet on weak growth in the US right now, especially when cyclicals versus defensives in the equity space are indicating ISM manufacturing readings above 55 and crude oil suggesting that we moving into a restocking cycle.The anticipated full-on rate-cutting cycle has been abandoned and replaced by the ‘no landing scenario.’ Torsten Slok of Apollo mentioned yesterday that the Fed could opt for a pause in November, which would be more controversial than a cut, in our opinion, especially since a cut has been reasonably well telegraphed.Interestingly, this shift isn’t primarily driven by a flare-up in inflation expectations, as oil prices remain muted despite the turmoil in the Middle East.

The Drill: The Reflation Story is alive and kicking except in Commodity markets

Macroeconomics

<ul><li>The fiscal briefings from China last weekend were exactly what we feared and have been warning about—a big nothing burger.</li><li>China keeps applying supply-side measures to a demand-driven problem, which is unlikely to succeed.</li><li>What China really needs is a forced increase in demand across the system, but instead, they’re focused on trying to incentivize demand for assets or reshuffle credit profiles.</li></ul>

The fiscal briefings from China last weekend were exactly what we feared and have been warning about—a big nothing burger.China keeps applying supply-side measures to a demand-driven problem, which is unlikely to succeed.What China really needs is a forced increase in demand across the system, but instead, they’re focused on trying to incentivize demand for assets or reshuffle credit profiles.

The Drill: Geopolitical risk premium in crude now almost gone

Ulrik contributes to Steno Signals and the Watch Series on all things related to markets. He is enrolled at the Copenhagen Business School where he studies Applied Economics and Finance and has prior to that worked at the Danish Consulate General in Munich as well as the German Chamber of Commerce in Copenhagen.