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• Prior +0.9%

That’s a solid beat on the estimate and it reaffirms the continued resilience in the UK housing market despite the economic and financial uncertainty from the Middle East conflict. The average price of a dwelling in the UK now rises further to £278,880. The annual change for house prices is +3.0%, marking the strongest change since May last year.

Nationwide notes that:

“Despite the uncertainty caused by developments in the Middle East and the subsequent rise in energy prices, the UK housing market has continued to regain momentum following the slowdown recorded around the turn of the year.

This is somewhat surprising given that indicators of consumer confidence have weakened noticeably. GfK’s headline index has fallen to its lowest level since late‑2023, reflecting households’ more pessimistic views of the economic outlook and their own financial position over the year ahead.

The market is likely being supported by the relative strength of household finances. In aggregate, household debt is at its lowest level relative to income for around two decades, and sizeable savings buffers have been built up in recent years, although these have not been evenly distributed across households.

Looking ahead, UK economic growth is likely to be somewhat weaker and inflation higher than previously expected as a result of developments in the Middle East, although the ultimate impact will depend critically on the duration of the shock and the policy response.

However, the UK economy and housing market have proved remarkably resilient in recent years. This provides some confidence that, if the latest shock passes relatively quickly, and energy prices normalise in the quarters ahead, any near-term softening in the housing market will also prove short lived.”

This article was written by Justin Low at investinglive.com.

The closure will be in observance of Labor Day and extends to all major European markets. Even the ECB’s payment and securities settlement systems will be down. As such, that will impact liquidity conditions as well. So, don’t expect any leading direction from Europe in driving broader markets for the session ahead.

London will still be open though, so there’s at least that to work with. But all things considered, the broader market mood is still heavily riding on what happens next with the US-Iran conflict.

For now though, Wall Street doesn’t seem to care but are investors being too complacent here? That’s something to consider.

The dollar is keeping steadier after the drop yesterday with USD/JPY bouncing back today to 157.25 currently, up 0.5% on the day. Meanwhile, S&P 500 futures are up 0.2% after the solid gains overnight. It will be interesting to see how much of yesterday’s moves were tied to month-end or markets being overly eager in writing off the war. We shall see.

This article was written by Justin Low at investinglive.com.

Axios reporter Barak Ravid:

• CENTCOM commander Admiral Brad Cooper and the chairman of the joint chiefs General Dan Caine briefed President Trump for 45 minutes today (Thursday US time) on new plans for possible military action against Iran, two U.S. officials said

This is not really fresh news, we knew this was happening.

This article was written by Eamonn Sheridan at investinglive.com.

• Japan intervenes to defend yen and warns of further action over Golden Week
• Axios:Trump received briefing on plans for possible military action against Iran
• ASEAN ministers warn Middle East war threatens energy security and regional growth
• May meeting, RBA set for third straight hike as Hormuz closure drives inflation surge
• Japan manufacturing PMI hits 4-year high but Middle East stockpiling masks fragile demand
• Japan head intervention official won’t comment on FX or oil futures intervention
• Tokyo CPI misses forecast sharply, giving BoJ room to hold despite June hike signals
• Gold could nearly double, $8K, as emerging market central banks ditch the USD for bullion
• Japan: Tokyo area April CPI headline 1.5% y/y (expected 1.7%, prior 1.4%)
• Australian factory input costs hit four-year high as Middle East supply disruption bites
• S&P 500 considers fast-track entry rules as SpaceX, OpenAI and Anthropic eye IPOs
• NZ consumer confidence hits three-year low as Middle East oil shock bites
• ECB June hike near-certain as Middle East energy shock forces policymakers’ hand
• Deutsche Bank sees ECB leaving door open to hike in June as inflation expectations surge
• Morgan Stanley delays Fed cut call to 2027 (more info). Middle East risk drives dollar
• S&P and NASDAQ indices close at record levels
• Apple authorises $100 billion buyback. Quarterly profits top Wall Street estimates

At a glance:

• Asia-Pacific markets subdued with Singapore, Hong Kong and mainland China on holiday; Japanese markets will be closed Monday to Wednesday next week for Golden Week
• USD/JPY edged back above 157.00 as Mimura declined to officially confirm Thursday’s intervention but warned speculators that Golden Week has just started and his view on speculative market moves is unchanged
• Tokyo April CPI missed across all three measures: headline 1.5% vs 1.6% expected; core ex-food 1.5% vs 1.8% expected, slowest since March 2022; core-core ex-food and energy 1.9% vs 2.3% expected
• Core Tokyo inflation below the BoJ’s 2% target for a third consecutive month, giving the bank cover to delay a June hike despite hawkish April meeting signals; yen-negative
• Australia and Japan manufacturing PMIs both posted strong headlines that masked significant underlying weakness in output, orders and supply chains

The Asia-Pacific timezone was a little subdued today with market holidays in major centres Singapore, Hong Kong and also mainland China. Note that Japanese markets will be closed Monday through Wednesday, inclusive, next week.

Atsushi Mimura, the Ministry of Finance’s most senior official on international financial affairs, declined to confirm JPY intervention directly but delivered a pointed warning to speculators, noting that Japan’s Golden Week holidays have just started and that there is no change to his view that market moves remain speculative in nature. USD/JPY ticked a little higher in a retrace move today, taking the pair back above 157.00.

In data today from Japan we had the Tokyo area CPI for April. Tokyo area inflation data leads the national data by about three weeks. Tokyo headline CPI came in at 1.5% year-on-year in April, below the 1.6% forecast and up from 1.4% in March. Core CPI excluding fresh food rose 1.5% year-on-year, its slowest pace since March 2022, missing the 1.8% forecast and slowing from 1.7% in March. Core-core CPI excluding fresh food and energy rose 1.9% year-on-year, well below the 2.3% forecast and the 2.3% prior reading, marking a significant deceleration in the measure most closely watched by the BoJ as a gauge of trend inflation. Tokyo core inflation has now remained below the BoJ’s 2% target for a third consecutive month, with fuel subsidies cited as a key factor suppressing readings despite rising raw material costs linked to the Middle East conflict. The continued drift lower is significant enough to give the BoJ genuine cover to delay a June hike despite the hawkish signals delivered at the April meeting. This, of course, is yen-negative.

We had mixed manufacturing PMI data from Australia and Japan. Both delivered strong headline results that masked significant areas of weakness.

This article was written by Eamonn Sheridan at investinglive.com.

ASEAN economic ministers warn Middle East war threatens regional energy security and growth. Strait of Hormuz carries ~25% of global seaborne oil and LNG; over 80% destined for Asia. Freight, insurance and logistics costs rising sharply.

Summary:

• The ASEAN Economic Community Council issued a joint statement on Friday warning that the Middle East war is posing growing threats to global energy security and could significantly slow regional economic growth
• Ministers expressed deep concern over disruptions to key maritime routes, specifically the Strait of Hormuz, through which approximately one quarter of global seaborne oil and LNG exports pass
• More than 80% of the oil and LNG transiting the Strait of Hormuz is destined for Asia, making the region uniquely and acutely exposed to any sustained disruption to that corridor
• The statement flagged persistent volatility in oil and LNG prices, sharply rising freight costs, higher insurance premiums and increased logistics costs as direct consequences of the disruption
• The formal collective statement from ASEAN’s economic ministers represents an escalation in the diplomatic acknowledgement of the war’s economic consequences, moving beyond individual national responses to a coordinated regional position
• The warning adds to a growing body of evidence that the Middle East war is functioning as a systemic economic shock for Asia, with effects visible across inflation data, manufacturing surveys and consumer confidence readings across the region

The economic ministers of Southeast Asia’s ten-nation bloc have broken into formal collective statement, warning that the Middle East war is inflicting severe damage on the region’s energy security and threatening to significantly slow growth across an area that is among the world’s most exposed to disruption in the Strait of Hormuz.

The ASEAN Economic Community Council’s joint communique, issued on Friday, puts diplomatic weight behind what the region’s economic data has been signalling for weeks. Manufacturing surveys from Japan to Australia have flagged supply chain disruption at multi-year extremes. Consumer confidence readings from New Zealand have collapsed to three-year lows. Central banks from Tokyo to Sydney are being forced into or toward rate increases they would not otherwise be making. The ASEAN statement is the political acknowledgement that these are not isolated national problems but a shared regional emergency with a single cause.

The geography of the crisis is the core of the ministers’ concern. The Strait of Hormuz, the narrow waterway between Iran and the Arabian Peninsula, carries approximately one quarter of all global seaborne oil and liquefied natural gas exports. Of that volume, more than 80% is bound for Asia. No other region on earth is as dependent on the unimpeded flow of energy through a single maritime chokepoint, and no other region therefore bears a greater share of the economic risk when that chokepoint is compromised.

The consequences are cascading. Oil and LNG prices have been volatile and persistently elevated, with crude briefly trading above $126 a barrel this week. But the statement draws attention to a set of secondary costs that are less visible in commodity price headlines but no less economically damaging: freight rates, insurance premiums and logistics costs have all risen sharply as shippers price in the risks of operating in or near a conflict zone. Those costs feed directly into the price of everything that moves by sea, which in an import-dependent region means virtually everything.

For ASEAN economies, the implications stretch from energy bills to monetary policy. The inflation consequences of sustained high energy and logistics costs are already forcing central banks across the region to maintain or tighten policy stances that are themselves weighing on growth. The ministers’ warning that regional growth could be significantly slowed is not a projection about a possible future state; it is a description of a process already underway.

—

The statement is notable less for its content, which reflects what markets already know, than for its diplomatic weight. A formal joint communique from the ASEAN Economic Community Council signals that the economic damage from the Middle East war is now severe enough to compel collective political acknowledgement from the region most exposed to it. That matters for how Asian governments respond in terms of energy policy, strategic reserve drawdowns and trade route contingency planning.

The numbers in the statement are stark. A quarter of global seaborne oil and LNG exports pass through the Strait of Hormuz, with over 80% of that volume destined for Asia. Any prolonged disruption to that corridor does not just raise prices; it threatens physical energy availability for economies that have limited short-term alternatives. The compounding effects on freight, insurance and logistics costs are already feeding through to broader inflation across the region, reinforcing the hawkish drift visible in central bank positioning from Tokyo to Sydney.

—

The Association of Southeast Asian Nations, known as ASEAN, is a regional intergovernmental organisation comprising ten member states: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Founded in 1967, it functions as the primary forum for economic, political and security cooperation across Southeast Asia. The ASEAN Economic Community Council, which issued Friday’s statement, is the ministerial body responsible for coordinating the bloc’s economic integration agenda and represents a combined GDP of approximately $4 trillion, making ASEAN collectively the fifth largest economy in the world. The bloc is home to around 670 million people and sits at the crossroads of global trade routes connecting the Indian Ocean to the Pacific, giving it an outsized strategic interest in the security of maritime energy corridors.

This article was written by Eamonn Sheridan at investinglive.com.

Japan April manufacturing PMI 55.1 vs 51.6 in March, best since January 2022. Output fastest since Feb 2014 but driven by stockpiling. Supply delays worst in 15 years. Input costs at 3.5-year high. Business confidence near 5-year low.

Summary:

• The S&P Global Japan Manufacturing PMI rose to 55.1 in April from 51.6 in March, its strongest reading since January 2022 and signalling the best improvement in sector conditions in over four years
• Manufacturing output expanded at its fastest pace since February 2014, with all three monitored sub-sectors recording improvement, led by intermediate goods producers
• New orders grew at their quickest pace since January 2022, but anecdotal evidence pointed to customer stockpiling driven by concerns over future supply chain delays and price increases from the Middle East conflict, rather than a broad-based improvement in end demand
• AI-related technology demand was also cited as a supporting factor for new order growth
• Supplier delivery times lengthened at the steepest rate in 15 years, matching the disruption seen in the immediate aftermath of the 2011 Tohoku earthquake, with the PMI calculation mechanically boosted by this deterioration as longer lead times are inverted in the index
• Stocks of purchases rose for the first time in ten months, driven by deliberate safety stock accumulation, though the rate of growth was only marginal given widespread supply delays
• Input cost inflation surged to a three-and-a-half-year high, the strongest since October 2022, with higher prices for raw materials, oil and transport cited by survey respondents; output price inflation was also the fastest since late 2022
• Employment grew at the second-fastest rate since January 2022 as firms expanded capacity to meet rising demand, while backlogs of work rose at the quickest pace since February 2014
• Business confidence in the one-year outlook slipped to its second-lowest level since June 2020, with Middle East uncertainty and its potential impact on global economic conditions weighing on output forecasts despite the strong near-term activity data
• The report warns explicitly that the current boost to manufacturing could fade quickly if market uncertainty persists, demand weakens and stock-building activity begins to reverse

Japan’s manufacturing sector posted its strongest PMI reading in over four years in April, with the headline index jumping to 55.1 from 51.6 in March. Output expanded at its fastest pace since February 2014, new orders grew at their quickest rate since January 2022, and employment rose at the second-fastest pace in four years. On the surface, it reads like a sector firing on all cylinders. The detail tells a more complicated story.

The primary engine of April’s apparent boom was not a strengthening in end demand but a scramble by manufacturers and their customers to build safety stocks ahead of anticipated further disruption from the Middle East conflict. Companies repeatedly cited concerns about future supply chain delays and price increases as the motivation for placing new orders, suggesting a significant portion of the activity surge is borrowed from future quarters rather than reflective of genuine underlying momentum. AI-related technology demand provided a secondary source of support, but it was stockpiling that dominated the narrative.

The supply chain data makes clear why. Delivery times for inputs lengthened at the steepest rate in 15 years, a deterioration comparable in scale to the disruption that followed the 2011 Tohoku earthquake. Because the PMI calculation inverts the supplier delivery times component, treating longer lead times as a proxy for capacity pressure from strong demand, this supply shock mechanically inflated the headline reading in much the same way as seen in the Australian PMI data for the same month. The index is signalling stress, not strength.

Cost pressures are intensifying rapidly. Input cost inflation accelerated to a three-and-a-half-year high, the strongest reading since October 2022, driven by higher prices for raw materials, oil and transport. Output price inflation also ran at its fastest pace since late 2022 as manufacturers passed costs through to customers at an accelerating rate. That combination of surging input and output costs sits uncomfortably alongside this week’s softer-than-expected Tokyo CPI data, and will complicate the BoJ’s already difficult task of reading the true state of underlying inflation.

The most telling number in the report may be business confidence. Despite output and new orders both expanding at their fastest rates in years, the one-year outlook slipped to its second-lowest level since June 2020. Firms are running hard in April precisely because they are uncertain about what comes next. If the Middle East conflict de-escalates and the stockpiling impulse fades, the pipeline of demand that is currently driving production could drain quickly, leaving manufacturers exposed to a sharp reversal in activity with input costs still elevated.

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As with the Australian PMI, the headline number requires significant qualification. A reading of 55.1 is eye-catching, but the composition tells a more cautious story. Supply chain delays at their worst since the 2011 Tohoku earthquake are mechanically inflating the index, while the surge in output and new orders is substantially driven by defensive stockpiling rather than end demand. If the conflict stabilises and stock-building reverses, the headline PMI could fall sharply without any underlying deterioration in genuine demand conditions.

The input cost inflation reading, at a three-and-a-half-year high, is the number most relevant to the BoJ. Combined with output price inflation at its fastest since late 2022, there is a clear cost pass-through dynamic building in Japan’s manufacturing supply chain that sits awkwardly alongside this week’s soft Tokyo CPI print. Business confidence slipping to its second-lowest since June 2020 despite the strong activity data is the most honest signal in the report.

This article was written by Eamonn Sheridan at investinglive.com.

Australia April manufacturing PMI 51.3 vs 49.8 in March, but headline flatters. Input costs fastest in 4 years, supply delays worst since July 2022. Output, new orders and employment all fell. Middle East war cited.

Summary:

• The S&P Global Australia Manufacturing PMI rose to 51.3 in April from 49.8 in March, moving back above the 50.0 no-change mark, but the headline reading was driven by supply chain disruption and inventory building rather than genuine demand improvement
• Suppliers’ delivery times lengthened to the largest degree since July 2022, and because longer delivery times are inverted in the PMI calculation, this mechanically inflated the headline index
• Input cost inflation accelerated to its fastest pace in over four years, with nearly 69% of respondents reporting a rise in input costs during the month; higher fuel prices were identified as the principal driver
• Output price inflation also surged, reaching among the fastest rates in the survey’s decade-long history, pointing to significant pass-through pressure building in the manufacturing supply chain
• New orders continued to fall, with new export business declining for the first time in four months; output fell for the third consecutive month, with the latest reduction the fastest in 16 months
• Employment was scaled back for the second consecutive month as firms responded to lower order books through non-replacement of leavers and reduced working hours
• Despite lower output requirements, manufacturers increased purchasing activity and built stocks of inputs for the first time in seven months, with anecdotal evidence pointing to deliberate safety stock accumulation ahead of anticipated further price rises and supply delays
• Business confidence fell for a third straight month to its lowest since July 2024, with the Middle East conflict, associated inflation and cost-of-living pressures cited as key concerns
• Some residual optimism remained in the year-ahead outlook, with manufacturers expressing hope that an end to the conflict would bring improved demand and operating conditions

Australia’s manufacturing sector posted a PMI reading above 50 in April for the first time since February, but the headline figure offers little genuine comfort. The index rose to 51.3 from 49.8 in March, but the improvement was almost entirely a function of supply chain disruption and defensive inventory building rather than any recovery in underlying demand. Stripped of those distortions, the picture is one of a sector under sustained and intensifying pressure from the Middle East conflict.

The mechanics of the PMI calculation mean that longer supplier delivery times, which are inverted in the index, add to the headline reading in the same way that improving demand would. In April, delivery times lengthened to the greatest degree since July 2022, driven by disruption to international freight and acute difficulties sourcing fuel. That single factor did more to lift the PMI above 50 than any genuine improvement in business conditions.

The three sub-indices that more directly reflect economic activity, new orders, output and employment, all remained in contraction. Output fell for a third consecutive month and at its fastest rate in 16 months. New orders continued to decline, with export business falling for the first time in four months as overseas demand softened. Employment was cut for the second month running as firms responded to lower workloads through reduced hours and the non-replacement of departing staff.

The inflation data is where the report becomes most significant for the broader economic outlook. Input cost inflation accelerated to its fastest pace in over four years in April, with nearly 69% of surveyed manufacturers reporting higher costs during the month. Fuel was the dominant driver, a direct consequence of the energy price shock emanating from the Middle East conflict. Output price inflation also surged, reaching among the highest rates recorded in the survey’s decade-long history, suggesting manufacturers are passing costs through at an aggressive pace.

Against that backdrop, manufacturers took the unusual step of building stocks of inputs despite falling output requirements, with purchasing activity rising and input inventories increasing for the first time in seven months. The rationale was explicitly defensive: securing materials ahead of anticipated further price rises and supply delays rather than any expectation of improved orders.

Business confidence fell for a third consecutive month to its lowest since July 2024. The Middle East conflict, the inflation it is generating and broader cost-of-living pressures were repeatedly cited as concerns. Some optimism about the year ahead persisted, conditional on a resolution to the conflict, but for now operating conditions are worsening with each passing month.

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The headline PMI number is misleading and markets should look through it. A reading of 51.3 driven almost entirely by supply chain delays and safety stock building is not a signal of improving demand conditions; it is a distress signal dressed up in expansionary clothing. The three sub-indices that matter most for genuine economic activity, new orders, output and employment, were all in contraction.

The input cost inflation reading at a four-year high, with output price inflation among the fastest in the survey’s decade-long history, is the number that will concern the Reserve Bank of Australia. If these price pressures persist and feed through to the broader economy, the case for rate cuts weakens further. Business confidence falling for a third consecutive month to its lowest since July 2024 underscores the fragility of the outlook.

This article was written by Eamonn Sheridan at investinglive.com.

ANZ-Roy Morgan NZ Consumer Confidence fell 11pts to 80.3 in April, a three-year low, down 20pts in two months. Inflation expectations jump to 6.6%. Personal finances weakest since mid-2008. Retail outlook deteriorates sharply.

Summary:

• The ANZ-Roy Morgan Consumer Confidence index fell 11 points in April to 80.3, its lowest reading in approximately three years, having dropped 20 points in the two months since the Middle East conflict began
• The future conditions index fell from 96.7 to 85.9, its lowest in two years, while the current conditions index dropped from 83.1 to 71.9, the weakest since October 2023
• Perceptions of current personal financial situations fell 11 points to a net -31%, the weakest reading since mid-2008, driven by the cost of living rather than income declines, as the oil shock has not yet meaningfully hit household incomes
• The net proportion of households viewing now as a good time to buy a major household item, considered the survey’s best retail indicator, fell 11 points to -25, the weakest since September 2024
• Perceptions of the economic outlook over the next 12 months fell 23 points to -48%, the lowest in three years; the five-year-ahead measure fell 2 points to +3%
• Two-year-ahead CPI inflation expectations jumped 0.9 percentage points to 6.6%, against a backdrop of petrol prices up approximately 30% year-on-year and food price inflation running at 4% to 5%
• House price inflation expectations eased from 3.8% to 3.2%
• Only a net 3% of respondents expect to be better off financially this time next year, down 7 points
• The oil price shock is identified as the clear driver, affecting household budgets directly through petrol prices and indirectly through broader concern about job security and economic conditions
• The widening gap between consumer inflation expectations of 6.6% and firms’ wage expectations of 2.5% is flagged as a key concern, alongside the noted drag on sentiment from expectations of OCR hikes

New Zealand consumer confidence has slumped to its lowest level in approximately three years, registering a sharp 20-point fall in the two months since the Middle East conflict began to drive energy prices higher. The ANZ-Roy Morgan Consumer Confidence index dropped a further 11 points in April to 80.3, a reading that puts current sentiment on a par with the difficult conditions of 2022 and 2023, a period New Zealand retailers will not recall with any fondness.

The driver is unambiguous. Petrol prices are up around 30% year-on-year, and the squeeze on weekly household budgets is showing up clearly across the survey’s key indicators. Current conditions fell to 71.9, the lowest since October 2023, while the forward-looking index dropped to 85.9, a two-year low. Perceptions of the broader economic outlook over the next 12 months fell a striking 23 points to a net -48%, the weakest read in three years, as households grow increasingly worried about what sustained high energy prices mean for jobs and the wider economy.

The most alarming single reading may be the personal financial situations measure, which tracks how households feel relative to a year ago. That fell 11 points in April to a net -31%, its weakest since mid-2008. Critically, the oil shock has not yet had time to feed meaningfully into household incomes, meaning this deterioration reflects outgoings rather than earnings. The pressure on budgets is coming through the cost of living, and it has further to run.

For retailers, the picture is bleak. The net proportion of households viewing now as a good time to buy a major household item, the survey’s most reliable retail spending indicator, fell to -25, its lowest since September 2024. That reading, taken alongside the ANZ’s separate Business Outlook survey (also an ugly negative confidence number) showing retail sector respondents as the most pessimistic cohort on future activity, points to clear downside risk for spending data in the weeks ahead.

Two-year-ahead inflation expectations jumped nearly a full percentage point to 6.6%, the highest in several years. The Reserve Bank of New Zealand does not set prices and so does not target consumer expectations directly, but the growing gap between households pricing in 6.6% inflation and firms anticipating wage growth of just 2.5% is a tension that will be difficult to ignore. Predictions of OCR hikes are themselves adding to the gloom, creating a feedback loop between policy expectations and consumer mood that complicates the RBNZ’s already difficult path.

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The scale and speed of the confidence collapse is notable: a 20-point fall in two months is not a gradual deterioration, it is a shock response. The direct read-across is to the Reserve Bank of New Zealand, which now faces a widening gap between consumer inflation expectations at 6.6% and firm-level wage expectations at 2.5%. That divergence will complicate the OCR outlook, particularly given that predictions of rate hikes are themselves being cited as a further drag on household mood.

For retailers, the current personal financial situations index at its weakest since mid-2008 is a serious warning. Combined with the separate ANZ Business Outlook showing retail sector respondents as the most pessimistic on future activity, the downside risk to near-term spending data is material.

This article was written by Eamonn Sheridan at investinglive.com.

• Japan intervened in the FX market — report
• Trump: Iran is dying to make a deal with us
• US initial jobless claims 189K vs 215K estimate
• US Q1 advance GDP +2.0% vs +2.3% expected
• US March PCE inflation +3.5% y/y vs +3.5% expected
• Canada February GDP +0.2% vs +0.2% expected
• ECB rate decision: No change, as expected
• ECB’s Lagarde: Most measures of longer term inflation stand around 2%
• Pakistani officials say they expect new Iran proposal this week – report
• AI infrastructure spending is the largest non-war project in human history
• Euro rises as report says the ECB very likely to hike in June
• Trump considers plan to deepen the blockade on Iran with allies – report

Markets:

• S&P 500 up 1.2% to record high
• Russell 2000 up 2.1%
• WTI crude down $1.82 to $105.07
• Gold up $73 to $4615
• US 10-year yields down 2.2 bps to 4.39%
• JPY leads, USD lags

The big question today: Were the moves position squaring ahead of month end, or a better view on the war?

Many of the big moves were reversals of the trend this month, or at least of the past week. That’s a move that looks like a ‘peace’ trade but there wasn’t any (public) indications of a breakthrough on Iran, or even talks. There are reports that Iran is readying another proposal and the usual rumors about peace but overall it was quiet on the Iran front.

The big news in earlier trade was the surge in the yen. There was some pointed and harsh talk about intervention beforehand but it wasn’t clear if it was actually intervention, a rate check or the strong words that caused the drop. A report from Nikkei confirmed it was intervention but the pair traded mostly sideways in New York.

That wasn’t the case for the euro as it initially declined on the ECB decision and press conference because there wasn’t the expected strong hawkish bias. However the usual ‘ECB sources’ reports later were much more hawkish and the euro rallied. That was combined with broad USD selling and helped push the euro as high as 1.1740.

The Bank of England held rates but the pound solidly outperformed the euro as it rose a full figure in the North American session.

The commodity currencies were also strongly bid as they climbed alongside a record run in stocks. Gold also turned around after yesterday’s selloff and climbed to $4616 in choppy trade.

Maybe the best sign that something more-fundamental was driving the move was the decline in Treasury yields, which fell 5.7 at the 2-year tenor.

Overall, it was the best month for stocks since 2020 as the AI trade was a full-throated barn burner but note that Sandisk and Western Digital are lower after the close post-earnings and a trio of Mag7 names that reported yesterday were also lower despite a red-hot tape.

This article was written by Adam Button at investinglive.com.

China begins 5 days of holidays today, back on May 6.

From Japan we get Tokyo area CPI for April. I’ll have more to come on this separately. Yen traders will be grappling with the echoes of the intervention (1, 2) that drove USD/JPY down from 160.

This article was written by Eamonn Sheridan at investinglive.com.

I don’t know how seriously you can take these kinds of comments.

• Iran in very bad shape
• Reiterates that they obliterated Iran’s nuclear capabilities
• Iran cannot be nuclear
• Iran drone and missile factories are down significantly
• Touts new stock market highs
• The blockade is incredible, Iran is now not getting any money from oil
• No one knows who Iran’s leaders are
• Now one knows what’s happening in talks except himself and a couple others
• I don’t know if we need to break the ceasefire with Iran

The market likes what it’s hearing and we’re seeing some further small bids in equities. The S&P 500 is at a record high, up 1.1% to 7216.

This article was written by Adam Button at investinglive.com.

This is a strange one:

Al-Arabiya cites a Channel 12 report, which is an Israeli TV station but says that Israel is preparing to announce the failure of negotiations with Iran

It’s strange because Israel isn’t negotiating with Iran, the US is. Israel is negotiating with Lebanon so maybe something is lost in translation along the way.

I don’t think anyone knows what Trump will announce (including perhaps Trump himself) so I would be skeptical of this report, but it’s making the rounds.

What is clear is that negotiations don’t appear to be making progress, though often it happens where you don’t see it. WTI crude oil is down $2.45 to $104.41 after rising as high as $110.93 earlier today so that’s a good sign.

Russian media reports that in a phone call with Trump, Russia’s Putin pointed out that if the US and Israel resume military operation, this would inevitably lead to extremely adverse consequences not only for Iran and its neighbours, but for entire international community. He also stressed that a ground operation on Iranian territory would be particularly unacceptable and dangerous.

Meanwhile, the Pakistani leaks are starting again and say they expect a revised Iranian proposal to end the war by the end of the week. We’ve certainly heard that kind of thing before but let’s hope it’s for real this time.

That’s from MS Now who reports this:

Two Pakistani officials in Islamabad with direct knowledge of the talks between the U.S. and Iran told MS NOW they expect a revised Iranian proposal to end the war by the end of the week.

The officials, who spoke on condition of anonymity given the sensitivity around the talks, said they will then share Iran’s proposal with U.S. negotiators and push for an in-person meeting between both sides early next week.

Both the U.S. and Iran are “focused on diplomatic solutions” to bring the war to an end, they said.

Maybe the sides aren’t that far apart.

This article was written by Adam Button at investinglive.com.