Market News

Summary:

• FT reports (gated) broker for US Defence Secretary Hegseth explored defence ETF investment pre-Iran strike
• Morgan Stanley approached BlackRock over multimillion-dollar allocation
• Target fund focused on defence contractors benefiting from rising military spending
• Investment did not proceed due to platform availability constraints
• Timing likely to raise scrutiny given Hegseth’s central role in Iran campaign
• No suggestion of wrongdoing, but optics likely to draw attention

A broker acting for US Defence Secretary Pete Hegseth explored a multimillion-dollar investment in a defence-focused exchange-traded fund in the weeks leading up to the US-Israeli military campaign against Iran, according to a Financial Times report.

The broker,…

There are a couple of important data points coming up; Tokyo CPI and China's official PMIs.

On the central bank front we have the minutes of the Reserve Bank of Australia March meeting. That meeting produced a back-to back rate hike (following the February hike).

Tokyo CPI

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,…

• Fed's Williams speaking: Tariffs and Iran war will push headline inflation higher
• Gold traders are utilizing retracement and MA levels on the daily and the hourly charts
• Crude oil futures settles at $102.88
• Israel proposes to Trump to strike Iran's energy to accelerate regime change - report
• ECB's Stournaras: ECB would react to a 2nd round of price effects
• WSJ: Leader look to ease the burden on fertilizer exports through the Strait of Hormuz
• Trump offers cryptic comments on negotiations but seems to stick with April 6 timeline
• Fed's Powell: Policy is in a good place to wait and see how current situation plays out
• March Dallas Fed manufacturing index +0.2 vs -0.2 prior
• Japan's fin min says watching market moves with a high sense of urgency
• Deputies…

Israel's Channel 12 reports that Netanyahu's government proposed to Trump that they should strike Iran's energy infrastructure to accelerate the collapse of the regime.

The report says Israeli officials have proposed a plan to Trump alleging there is a window of opportunity to topple the Iranian regime through the financial crash caused by potential strikes on energy infrastructure.

That's certainly not helping sentiment and that kind of crash might be the thing to topple a few countries' governments, especially if Iran makes good on threats to hit energy infrastructure in the region in response.

Stock markets are now negative on the day with the S&P 500 down 10 points after climbing by 50 premarket. WTI crude oil is up $3.82 to $103.46,…

The WSJ is reporting that diplomats and global leaders are floating a proposal to reopen the Strait of Hormuz for fertilizer exports using a model similar to the Ukraine grain corridor established during the Russia-Ukraine war. The idea is to create a protected humanitarian shipping route, allowing critical supplies to move safely despite ongoing tensions.

Support for the plan is building among politicians and Non-Goverment Organizations, with figures like former Ireland President Mary Robinson and Sweden’s former prime minister Carl Bildt backing the initiative. Ukrainian President Zelensky has also been involved in discussions, offering insights from how the Black Sea grain corridor successfully operated.

The proposal could also align…

This day just keeps getting worse.

At the start of trading Monday it looked like Trump was on track to get some kind of ceasefire by now. Instead, we have talk of bombing steel plants and now this.

The Houthis in Yemen say they will enter the conflict on the side of Iran if any alliance joins the US and Israel. The possible chokepoint now is the the Bab el-Mandeb Strait, which they could try to blockade. If so, it's not as devastating as the Strait of Hormuz because the traffic can go through the Suez canal. But it makes the trip significantly longer as the Saudi oil redirected to the pipeline in the Red Sea would now have to travel through the Mediterranean and then around Africa.

Saudi Arabia has also indicated it could enter into the war…

President Trump spoke with the New York Post in some comments that are hard to interpret. He seemed to indicate that the US was negotiating with Iran's parliamentary speaker, someone who was reported dead on the weekend but has continued to tweet frequently, including about market moves.

Asked about Iran Parliament Speaker Mohammad Bagher Ghalibaf, he encouraged Iran to make a deal before it's too late.

“We’re gonna find out,” Trump told The Post. “I’ll let you know that in about a week.”

That corresponds with the April 6 deadline Trump set. However the market isn't sure how seriously to take that timeline given that he's extended it twice already.

Trump also leaned into the regime change rhetoric, which is an odd one given that the Supreme…

S&P 500 futures were up 50 points shortly before the open, but that's faded to just +5 shortly after the open.

The drop in stocks has come as oil prices have ticked back higher. WTI crude is up $2.96 to $102.56 and that's now just 80-cents from the session high.

Given the threats from Trump, there is the threat of the destruction of Iran's oil industry, and the corresponding attacks by Iran on its neighbour's facilities. That would plunge the world into crisis as there is no way to bring those barrels back or replace them.

Despite rising oil, the bond market is increasingly seeing a flight to safety. US 10-year yields are now down 9 bps and near a session low at 4.35%. There is an argument for looking beyond the oil shock towards the growth…

• Prior was +0.2
• New orders +6.1 vs +11.8 prior
• Prices paid 32.7 vs 31.7 prior
• Employment -1.0 vs +7.5 prior

The surging energy market is undoubtedly a boom for Texas, even with the associated inflation headwinds. However it's going to be tough to pull the trigger on fresh drilling unless executives feel that the war will continue.

The comments in the report might be more representative of how higher energy is hitting the broader economy:

Beverage and tobacco product manufacturing

• We have seen decreases in some of our costs, in particular agricultural raw materials. We have seen increases in the costs of our packaging materials, some of this related to increase in energy costs. We expect the Iran war to cause increases in energy costs for…

The mood is positive in US markets so far this week as Trump talks about a de-escalation.

The messages are mixed though and that's leading to some confusion. The oil market remains 1.8% higher but US stock futures are up 0.8% and Treasury yields are down 5-7 bps across the curve.

Trump tweeted about negotiations, much as he did last week, but this time the pop in US stock futures was fleeting.

The United States of America is in serious discussions with A NEW, AND MORE REASONABLE, REGIME to end our Military Operations in Iran. Great progress has been made but, if for any reason a deal is not shortly reached, which it probably will be, and if the Hormuz Strait is not immediately "Open for Business," we will conclude our lovely "stay" in Iran…

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• Prior +1.9%
• HICP +xx% vs +2.8% y/y expected
• Prior +2.0%
• Core CPI Y/Y +xx% vs +2.5% prior