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• The two sides are studying the texts that were exchanged
• If Israel attacks Beirut, we would respond decisively
• Our contacts with the US have not been cut off but not progress has been made.

Early this week, oil prices rose on a report saying that Iran had cut off negotiations. That doesn't appear to be the case but oil is up 10% this week as there is no end in sight to the blockades. The latest comments about 'no progress' has helped to lift oil prices in the past few minutes.

Recent headline news has been full of different geopolitical headlines:

• Two rockets have been launched from southern Lebanon toward Israel.
• Rubio says it's impossible to sign any agreement with Iran that does not include highly enriched uranium.
• Treasury Secretary Bessent acknowledges that relations with China are more stable. Will see if China commits to larger Boeing purchases.
• Comments that Hezbollah leaders have a backed down from condition of Israeli which role as a prerequisite for accepting a cease-fire
• Iranian source said that the Iran's gratuitous threats are over and that any aggression will be met with regrettable response.
• Rubio told Congress that the US is waiting for Iran's final sign off on negotiations surrounding Tehran's…
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• Prior month factory orders 1.5% revised higher to 1.8%
• Factory orders for April 4.8% vs 4.6% estimate
• Durable Goods revision for April 8.0% vs 7.9% preliminary. Durable goods in March was 1.3%
• Durable Goods ex defense 8.1% vs 8.1% preliminary. Last month -0.3%
• Durable goods ex Transportation 1.1% versus 1.1% preliminary. Last month 1.1%
• Non defense Capital goods ex Air -1.0% versus -1.1% preliminary. Last month 3.9%
• Factory orders Ex Transportation 1.3% versus 1.6% preliminary. Prior month revised higher to 1.8% from 1.6%.

The April factory orders and durable goods reports point to a manufacturing sector that remains resilient, although much of the strength continues to be driven by transportation-related orders. Factory orders rose 4.8%,…

• Iran always lies, always cheats
• You have to have a way to remove nuclear material
• We want to make sure Iran doesn't pose a threat to Israel and America, that's our common goal
• Some times we have tactical disagreements
• We always find a way to work out our differences
• We have to disarm Hezbollah and demilitarize Lebanon
• A free and independent Lebanon needs to emerge
• Many of those chieftains targeting Israel are in Beirut
• We've weakened the Iran regime, it's not over
• Iran is 'playing with fire' on escalation
• Trump understands what's at stake
• I will leave it to Trump if military escalation needed
• I don't think Iran wants an out

The comment about demilitarizing Lebanon is concerning because it's a maximalist goal that essentially means conquering the whole…

• Prior was -3327K
• Gasoline +3364K vs -513K expected
• Distillates +1502K vs -319K expected
• Refinery utilization +0.2% vs +0.3% expected

API data released late yesterday:

• Crude -6750K
• Gasoline -3199K
• Distillates -214K

WTI crude oil was up $1.10 to $94.92 ahead of the report.

• Prior was 50.9
• Final April reading was 51.0
• Final composite PMI 51.5 vs 51.7 prelim and 51.7 prior

The ISM services survey is due at the top of the hour, alongside factory orders.

Four of seven sectors expanded, down from five in April and the fewest since June 2025. Healthcare leading isn't exactly cyclical expansion so be careful with any optimism here.

Consumer Services is concerning. At 47.5 it was the sharpest contraction of any sector, and it's now shrunk in three of the last four months. This is the part of the economy that actually tracks the household — discretionary spending, the consumer's willingness to show up — and it's been bleeding since winter. Financials and Technology also slipped into contraction. So the three sectors most…

• Business activity index vs 55.9 prior
• Employment vs 48.0 prior
• New orders vs 53.5 prior
• Prices paid vs 70.7 prior
• Supplier deliveries vs 56.8 prior
• Inventories vs 53.1 prior
• Backlog of orders vs 53.0 prior
• New export orders vs 52.1 prior
• Imports vs 54.7 prior
• Inventory sentiment vs 55.1 prior

Before today's report, the ISM services report showed the U.S. services sector remained in expansion through April, though the details were more mixed than the headline suggested. The Services PMI slipped to 53.6 from 54.0 in March, marking the 22nd straight month above the 50 threshold. Business activity improved to 55.9, suggesting current demand remained resilient, but new orders fell sharply to 53.5 from 60.6, indicating that March’s surge may have…

• Prior was +109K (revised to +105K)

Details:

• Goods -3K versus +15K last month
• Service +36K versus +94K last month
• Small business +49K vs +65K prior
• Medium businesses +10K vs +2K last month
• Large businesses +40K vs +42K last month

Wages:

• Wages for job stayers 4.4% vs 4.4% last month
• Wages for job changers 6.5% vs 6.6% last month

This number is very close to consensus and is essentially in-line with expectations. In terms of the macro, that's a good sign that the US economy is solid, if not turning towards strength.

ADP said hiring was more broad-based than they've seen in recent years and is showing sustained momentum.

This report adds to some of this week's optimism after a very strong JOLTS report and a good ISM manufacturing report. I see increasing…

• Prior was -0.1% (revised to -0.3%)
• Unit labour costs +1.4% q/q, fourth consecutive gain (+3.2% y/y)
• Goods led the decline (-1.7%); ag/forestry cratered -8.6%, construction -2.3%

Statistics Canada says business sector labour productivity fell 0.5% in Q1, the second straight quarterly drop after -0.3% in Q4. The Q4 number was revised down from -0.1% in today's report.

We already know that real GDP slipped 0.1% on the quarter. Hours worked rose 0.4%. So Canadian businesses put more hours in and got less out. That's the whole productivity miss in one sentence — you're running harder to stand still.

The piece that actually matters for the Bank of Canada is buried at the bottom: unit labour costs jumped 1.4% q/q, the fourth consecutive quarterly…

Headlines:

• US president Trump reaffirms that Iran has agreed to not have a nuclear weapon
• Iran reserves right to defend against any country permitting US attacks
• EU says latest US tariffs on forced labour grounds are unjustified
• USD/JPY continues to poke and prod at intervention strike zone
• BOJ governor Ueda says will continue to raise policy rate if baseline outlook holds
• ECB policymaker Elderson says prolonged war increases likelihood of second-round effects
• SNB Chairman Schlegel says medium-term inflation pressure is basically unchanged
• Eurozone business activity struggles further in May amid surging price pressures
• UK May final services PMI 49.3 vs 47.9 prelim
• How likely is a U.S. debt crisis?

Markets:

• WTI crude up 2% to $95.70
• European indices…
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• Iran has agreed they will not have a nuclear weapon
• Iran's supreme leader (Mojtaba Khamenei) is involved in negotiations with the US
• He is the one authorising talks, will probably meet with him at some point
• We have very little inflation, stock market is doing very well
• Gasoline prices will fall after the conflict with Iran ends
• Naval blockade on Iran could be lifted by Labour Day, but unlikely
• It's likely that I'll reach some sort of agreement with Khamenei
• Iran situation is rapidly evolving, will be very good
• I have a good relationship with Israel prime minister Netanyahu
• I was a bit perturbed at his fighting in Lebanon

Trump is commenting the above on a podcast interview. It looks like he is trying to continue to push the notion that Iran will…

FUNDAMENTAL OVERVIEW

Gold is again on the backfoot as yet another rally on optimism gets faded. Tonight, Iran's IRGC launched a wave of ballistic missile attacks targeting US military bases across the Gulf, including an Air Base in Kuwait. Iranian officials described the strikes as retaliation for US actions against an oil tanker near the Strait of Hormuz and military operations on Qeshm Island.

Bahrain, Saudi Arabia and the United Arab Emirates also reported attacks at multiple facilities hosting US personnel. According to US Central Command, American forces conducted "self-defense" operations, including strikes on targets on Qeshm Island in response to attempted attacks by Iran.

The ceasefire continues to look weaker by the day but a full…