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• The major US stock indices close at record levels
• Reports that Iran targeted 4 American ships that attempted to cross the Straits of Hormuz
• Crude Oil futures settle up $0.22 at $88.90. Technical bias is to the downside.
• Treasury Secretary Bessent: Oil prices will be lower than pre-conflict levels
• More from Musalem: Bond market is signaling a resilient economy/higher expected inflation.
• US Treasury sells $77B of 7 year notes at a high yield of 4.290%
• US/Iran MOU on ceasefire has reached an agreement but Trump still needs to approve it
• Crude oil inventories fall -3.327 million versus -4.143 million estimate
• Atlanta Fed GDPNow estimate for Q2 comes in at 3.8% down from 4.3%
• More from Fed’s Musalem: Baseline is inflation will take longer to come down
• Feds Musalem: Caution warranted in the face of upward inflation pressures
• Axios: US and Iran have reached a tentative 60-day Memorandum of Understanding
• US new home sales for April 0.622 million versus 0.665 million estimate
• More from Feds Williams: We have a solid US economy.
• Feds Williams: Higher productivity rates can raise real interest rates
• US April durable goods orders +7.9% vs +3.5% expected
• US Core PCE for April YoY 3.3% vs 3.3% estimate. MoM 0.2% vs 0.3% estimate
• US initial jobless claims 215K vs 211K expected
• investingLive European markets wrap: Oil up, stocks down on continued US-Iran tensions

The dollar softened broadly today, pressured by slightly cooler-than-expected PCE data which provided some relief from higher rates along with optimism around a proposed Memorandum of Understanding to kick off advanced peace talks. Both developments added to the headwinds of safe-haven demand for the greenback.

Below is the list of the currencies which advanced the most vs the USD

• New Zealand Dollar – +0.54%
• Canadian Dollar +0.44%
• Swiss Franc +0.37%
• Australian Dollar – +0.32%
• Euro – +0.22%
• Japanese Yen +0.16%
• British Pound – +0.10%

The commodity-linked Aussie, Canadian Dollar and Kiwi led gains, likely buoyed by the risk-on tone from the peace talk developments. The Euro and Sterling also firmed modestly.

In the US debt market today, Treasury yields moved lower across the curve, with the longer-end leading the decline. The 10-year yield fell 3.2 basis points while the 30-year yield dropped 3.4 basis points, reflecting stronger demand for longer-duration debt and a more favorable tone in the bond market. The move lower in yields also came as softer inflation concerns and easing geopolitical tensions helped support buying in Treasurys.

7-year auction: The U.S. Treasury’s 7-year note auction was met with solid demand from international buyers, helping keep downward pressure on yields.

Fed officials were less hopeful about inflation although uncertainty continues to persist.

New York Fed President John Williams struck a balanced tone, leaning slightly hawkish overall as he emphasized the importance of keeping inflation expectations anchored and reiterated the Fed’s commitment to returning inflation to the 2% target. Williams acknowledged the U.S. economy and labor market remain solid, while highlighting rising productivity trends supported in part by AI and broader U.S. economic dynamism. However, he warned that supply-chain disruptions tied to the war could push inflation higher in the near term, with headline inflation expected to peak near 4% and core inflation around 3% in coming months. Despite those concerns, he said longer-term inflation expectations remain stable and stressed that monetary policy is currently “well-positioned.” Williams repeated that future policy decisions will remain data dependent, signaling the Fed is not ready to commit to either easing or tightening until the inflation and growth outlook becomes clearer.

St. Louis Fed President Alberto Musalem also struck a cautious and somewhat hawkish tone in remarks today, emphasizing that inflation risks remain tilted to the upside even as the Fed keeps policy steady. Musalem said the Fed’s real policy rate is now below the long-run neutral rate, while longer-term inflation expectations have started to drift higher and the labor market remains stable. Against that backdrop, he argued that policymakers need to maintain a “vigilant focus” on returning inflation to the Fed’s 2% target and warned that the process is likely to take longer than previously hoped. He added that if disinflation does not resume over the next one to two quarters, it would become a growing concern, particularly if inflation expectations continue to rise.

Musalem also pushed back against the idea that stronger productivity gains from artificial intelligence will quickly solve the inflation problem. While acknowledging AI could eventually improve productivity, he said current evidence remains inconclusive and that relying on future productivity gains to offset present inflation pressures would be risky. He reiterated that the possibility of another rate increase is “greater than zero,” noting there is a scenario where the economy may require tighter policy if inflation remains sticky. At the same time, he acknowledged a separate path where growth slows later this year and inflation eases, which could open the door to rate cuts. For now, however, Musalem said risks remain skewed more toward inflation than toward weaker growth. He also noted that recent moves higher in bond yields largely reflect expectations for a higher neutral rate and said he supported removing the Fed’s prior “easing bias.” Overall, the comments leaned hawkish, with Musalem signaling the Fed is not yet confident inflation is moving sustainably back toward target.

Fundamentally, the April PCE inflation report offered a mixed but slightly encouraging picture on inflation, with monthly price pressures coming in a bit softer than expected while annual readings remained sticky. Core PCE, the Fed’s preferred inflation gauge excluding food and energy, rose 0.2% for the month versus 0.3% expected, while the year-over-year rate came in at 3.3%, matching estimates but ticking up from 3.2% previously. Headline PCE also came in a touch softer on the monthly basis at 0.4% versus 0.5% expected, while the annual rate held at 3.8% as forecast. More encouraging for the Fed, services inflation excluding energy and housing slowed to 0.1% from 0.3% last month, while broader core measures excluding food, energy, and housing rose 0.2%, also cooler than the prior month.

On the consumer side, however, the report showed signs of softening demand and increasing financial strain. Personal income was unchanged in April versus expectations for a 0.4% rise, while personal spending increased just 0.1%. Real PCE rose only 0.1%, suggesting consumers are becoming more cautious as higher prices and borrowing costs weigh on budgets. The personal savings rate fell to just 2.6%, a historically low level that highlights how much consumers have drawn down pandemic-era savings. Historically, U.S. savings rates have averaged closer to 5%–8%, making the current reading one of the weakest in decades and closer to levels seen ahead of the 2008 financial crisis.

The initial market reaction saw Treasury yields move modestly lower as traders focused on the softer monthly inflation readings, although the year-over-year inflation data still remains well above the Fed’s 2% target. Overall, the report suggests inflation progress is continuing, but only gradually, while cracks are beginning to emerge in consumer finances and spending trends.

U.S. durable goods orders surged 7.9% in April, well above the 3.5% expected increase, driven largely by a sharp rise in transportation equipment orders, particularly aircraft bookings. The gain followed an upwardly revised 1.3% increase in March, signaling continued strength in headline manufacturing demand. Excluding transportation, orders still rose a solid 1.1%, beating the 0.5% estimate, while orders excluding defense jumped 8.1% after a decline the prior month.

Despite the strong headline numbers, the report had a softer underlying tone for business investment. Non-defense capital goods orders excluding aircraft — the closely watched core capex component that feeds into GDP calculations — fell 1.1% versus expectations for a 0.4% increase. That decline followed a strong upwardly revised 3.9% gain in March, suggesting some payback after prior strength rather than a collapse in investment demand.

Overall, the report points to resilient manufacturing activity on the surface, boosted by large transportation orders, but more moderate momentum underneath in core business spending. Markets often look beyond the volatile aircraft-driven headline number and focus more closely on the softer core capital goods data as a better gauge of future business investment trends.

This article was written by Greg Michalowski at investinglive.com.

A tweet from Guy Elster, Walla Foreign Correspondent says:

The full opening of the Straits of Hormuz is a prerequisite (a redline) of any deal with Iran according to comments from White House officials. So this does not give a positive feeling. Although there were reports of a memorandum of understanding, the president had not signed off on the deal. Crude oil is trading at $89.50. That’s up $0.82 on the day.

This article was written by Greg Michalowski at investinglive.com.

A packed data agenda ahead for the day here in Asia-Pacific.

Tokyo inflation data is due. Tokyo consumer prices are expected to show little movement in May compared with April, with key inflation measures remaining at or below the Bank of Japan’s 2% target, as you can see in the screenshot.

The capital’s CPI is likely to reflect competing forces. The expiry of government subsidies on gas and electricity and higher taxi fares introduced in late April point to modest upside, as do signs of rising apartment rents at the start of Japan’s financial year. Offsetting those pressures, easing energy and food prices are expected to limit any gains, while emergency subsidies keeping petrol prices near ¥170 per litre remained in place through the month.

All three main CPI measures fell below the 2% threshold in April for the first time since October 2024, and that underlying softness is expected to carry into May. Core CPI, excluding fresh food, is forecast at +1.5% year-on-year, matching April’s four-year low. The headline measure is seen edging up to +1.6% from +1.5%, while the core-core index, stripping out both fresh food and energy, is expected to hold at +1.9%.

Tokyo inflation data is closely watched by markets as an early signal for Japan’s broader price trends, with national CPI figures typically released around three weeks later due to the longer time required to compile nationwide data.

The Tokyo CPI serves as a sub-index of Japan’s national inflation measure, tracking changes in the prices of goods and services within the Tokyo metropolitan area. Given Tokyo’s status as the country’s largest city and a central economic hub, the data is widely regarded as a leading indicator for national inflation dynamics.

Historically, inflation readings in Tokyo have tended to run slightly above the national average. This reflects the relatively higher cost of living in the capital, where expenses such as rent are generally elevated compared to other regions across Japan.

As a result, Tokyo CPI often provides markets with an early directional cue on underlying price pressures, helping shape expectations ahead of the official nationwide release.

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

• Did have a call with Imans
• Oil prices will be lower than pre-conflict
• A 2000 ships are waiting to come out of the gulf, and the oil market is set to be very well supplied.
• Pres. Trump has said there are several redlines and the Strait of Hormuz has to be free and open.
• Nothing is on the table until the Strait is reopened
• Oman told him they will not toll the strait (So Trump need not bomb them).
• Believe Warsh will do the right thing to balance inflation and growth.
• US has been patient.Will continue defensive actions vs Iran
• Everything we have been done has been defensive so far.
• Patience with Iran is not forever.

Meanwhile, another report is now saying that the memorandum of understanding between Iran and the US has not been finalized nor confirmed.

This article was written by Greg Michalowski at investinglive.com.

• Bond markets are signaling a resilient economy and higher expected inflation.
• Most of the recent move higher in bond yields reflects a higher expected neutral rate.
• Wanted to remove the Fed’s “easing bias.”
• Reducing the banking system’s demand for reserves would provide a smoother path toward a smaller Fed balance sheet than shrinking reserve supply.

Overall tone: More hawkish. The comments emphasized resilient growth, rising inflation expectations, and a preference to remove easing bias, all of which lean toward keeping policy restrictive for longer.

This article was written by Greg Michalowski at investinglive.com.

• High Yield 4.290%
• WI level at the time of the auction 4.291%
• Tail -0.1 basis points
• Bid to cover 2.52X which is near the six month average of 2.48X
• Directs 11.2% much lower than the average of 27.5%
• Indirects 78.39% much higher than the average of 61.2%
• Dealers 10.42%. Lower than the average of 11.3%

AUCTION GRADE:C+

The WI level at the time of the auction was 4.291%. The seven year note was auctioned off at a high yield of 4.290% just below that level. The bid to cover came in near the average. The mix however was very much skewed toward international buyers. They took a whopping 78.4% (well above the 61.2 average), while domestic buyers only took 11.2% (below the average of 27.5).

The numbers from the buyers were a bit mixed up, but overall demand as measured by the tail, the bid to cover, and dealer percentage were near the averages.

This article was written by Greg Michalowski at investinglive.com.

The weekly EIA inventory data shows:

• crude oil inventories -3.327 million versus -4.143 million estimate
• distillates -2.107 million versus -1.024 million estimate.
• Gasoline -2.572 million versus -2.412 million estimate.
• Cushing -2.794 million versus -1.604 million last week
• refinery utilization 2.9% versus 0.7%

The private data released late yesterday showed:

Crude oil is trading up $1.15 at $89.82. The high for the day was at $92.52. The low was at $87.11.

The Energy Information Administration (EIA) weekly petroleum status report is one of the most closely watched releases in the oil market because it provides a snapshot of U.S. supply, demand, and storage conditions. Released each Wednesday (unless delayed by holidays), the report details changes in crude oil inventories, gasoline inventories, distillates (such as diesel and heating oil), refinery utilization, imports, exports, and domestic production. Traders compare the actual inventory change to market expectations. A larger-than-expected build in crude inventories often suggests weaker demand or excess supply and can pressure oil prices lower, while a larger-than-expected drawdown typically signals stronger demand or tighter supply and can support higher prices.

Beyond the headline crude number, traders also focus heavily on gasoline and distillate inventories because they provide insight into consumer demand and industrial activity. Refinery utilization rates are important as well, since rising refinery activity can indicate stronger fuel demand or preparation for seasonal consumption patterns such as summer driving season. The report can create significant volatility in crude oil, gasoline futures, energy stocks, and even inflation expectations because oil prices influence transportation costs, consumer spending, and broader economic conditions. Markets also compare the EIA data with the American Petroleum Institute (API) estimates released the night before, often leading to price adjustments if the two reports differ materially.

This article was written by Greg Michalowski at investinglive.com.

There are increasing reports suggesting progress toward a cease-fire agreement between the U.S. and Iran. According to multiple sources, the deal would be implemented in two phases, beginning with the signing of a memorandum of understanding (MOU). Reports indicate that Pakistan is expected to witness the signing ceremony.

Reuters is reporting that negotiators have reached an agreement on a 60-day extension of the cease-fire framework, although President Trump still needs to give final approval before the deal can move forward. Earlier reports suggested that neither President Trump nor Iran’s Supreme Leader Ayatollah Khamenei had formally approved the agreement. Fox News is also reporting similar developments, noting that a tentative agreement appears to be in place, pending Trump’s approval.

This article was written by Greg Michalowski at investinglive.com.

• Prior month 0.682 million revised to 0.663M
• New home sales 0.622M vs 0.665M estimate.
• New Homes sales down -6.2% vs +3.4% last month

Details for the month:

• April new home sales: 622K annualized vs 663K in March
• Month-over-month change: -6.2%
• Year-over-year change: -11.3% vs 701K in April 2025

Inventories move higher

• Homes for sale inventory: 489K vs 481K prior
• Inventory change from March: +1.7%
• Inventory change from year ago: -2.2%
• Months’ supply: 9.4 months vs 8.7 months prior
• Months’ supply vs year ago: 8.6 months
• Higher supply suggests homes are taking longer to sell

Prices move higher

• Median sales price: $422,500 vs $391,100 prior
• Median price month-over-month: +8.0%
• Median price year-over-year: +2.2%
• Average sales price: $508,800 vs $505,200 prior
• Average price month-over-month: +0.7%
• Average price year-over-year: -1.1%

Summary:
The April new home sales report was weaker overall, with sales falling sharply from both the prior month and a year ago as affordability and mortgage rates continue to weigh on demand. Inventory and months’ supply increased, pointing to a softer housing market and more supply available for buyers. Despite weaker demand, home prices remained r

The data is based on signed contracts.

This article was written by Greg Michalowski at investinglive.com.

Axios reports the U.S. and Iran have reached a tentative 60-day memorandum of understanding (MOU) to extend the ceasefire and begin formal nuclear negotiations.

• The agreement still requires final approval from President Trump, who reportedly asked for several days to review the proposal.
• U.S. officials say Iranian negotiators indicated they received approval from senior leadership and were prepared to sign.
• The proposed deal would mark the biggest diplomatic breakthrough since the conflict began, although a broader permanent agreement would still require lengthy negotiations.
• The MOU would guarantee “unrestricted” shipping through the Strait of Hormuz, including:
  • No tolls
  • No harassment of commercial ships
  • Removal of Iranian mines within 30 days
• The U.S. naval blockade would gradually be lifted as commercial shipping resumes.
• Iran would commit not to pursue a nuclear weapon.
• Early negotiations during the 60-day period would focus on:
  • Disposal of Iran’s highly enriched uranium
  • Future uranium enrichment limits
• The U.S. would agree to discuss:
  • Sanctions relief
  • Release of frozen Iranian assets
  • Mechanisms for humanitarian aid and goods shipments

Markets are likely to view the report as reducing immediate geopolitical and oil supply risks, especially with the focus on keeping the Strait of Hormuz open.

Skepticism remains because previous negotiations were also described as “close” before ultimately falling apart.

This article was written by Greg Michalowski at investinglive.com.

New York Fed president Williams is speaking:

• higher productivity rates can raise real interest rates.
• Shifts in productivity are hard to spot in real time.

Williams does not comment on near term policy outlook

This article was written by Greg Michalowski at investinglive.com.

Treasury Secretary Bessentt is announcing some economic sanctions against Iran in what he terms the economic fury campaign against the Iranians.

• Only a satisfactory outcome in negotiations will and Iran’s downward spiral economically .
• The U.S. Treasury will sanction Iran’s Persian Gulf Strait Authority
• We also shut down Iranian airlines access to landing spots, refueling, and ticket sales

Do the economic sanctions lead to a framework for an agreement or does it lead to more bombing? That remains the fence the market is sitting on with regard to the war in Iran.

This article was written by Greg Michalowski at investinglive.com.