Market News

• Prior +2.3%
• HICP +3.4% vs +3.3% y/y prelim
• Prior +2.5%

Core annual inflation is seen at 2.9% and that is a step up from the 2.7% reading in February. As higher energy prices bump up headline inflation, it will eventually also spill over to core prices down the road. That even more so the longer that this US-Iran conflict keeps up and the Strait of Hormuz remains in de facto closure.

For now though, the broader market mood is still one that is leaning more towards being more optimistic. However, the reality of the situation remains that nothing will change until something changes on the Strait of Hormuz. Traders and investors are holding out hope but is it only a matter of time before it all comes tumbling down?

This is mostly a repeat to what we've heard from earlier in the day, that both sides are eyeing talks on Thursday in Islamabad.

But as the echo chamber gets louder, we're seeing market players pick up on the optimism and running with it. It's a funny thing that even though the latest development is essentially a reset to last week, markets are growing even more optimistic of a positive outcome. All this while the Strait of Hormuz remains in de facto closure for longer.

I would argue that reservations are still warranted, not least with there needing to be more positive progress before next week for the oil market. From earlier: Oil prices fall back on renewed hope of a US-Iran deal

But at the same time, it would be bad form to underestimate…

China exports miss sharply as imports surge, narrowing trade surplus.

Summary:

• Exports +2.5% y/y (vs +8.6% expected)
• Imports +27.8% y/y (vs +11.2% expected)
• Trade surplus $51.1bn (vs $108.2bn expected)
• Yuan exports stronger due to FX effects
• Strong domestic demand, weaker external demand

China’s March trade data showed a sharp divergence between imports and exports, with demand holding up domestically while external momentum disappointed expectations.

In dollar terms, exports rose just 2.5% year-on-year in March, well below the Reuters poll forecast of 8.6%, signalling a loss of momentum in external demand. In contrast, imports surged 27.8% y/y, far exceeding expectations of an 11.2% increase, pointing to strong domestic demand and…

• US Treasury’s Bessent backs “wait and see” on rates
• China exports miss, imports surge as trade surplus shrinks sharply
• Some China trade data dribbling out. Q1 trade data shows imports surge, exports stay firm
• HSBC warns peace deal needed to restore energy flows and curb inflation
• Australia business confidence plunges to -29 as Iran war shock hits outlook
• Vance comments have driven down oil, driven up risk assets. Trump will give him a cookie.
• PBOC sets USD/ CNY central rate at 6.8593 (vs. estimate at 6.8173)
• US-Iran talks end without deal but leave door open for further dialogue.
• Monetary Authority of Singapore tightens policy as inflation rises, flags slower growth
• Katayama flags global talks, no new policy signals in her comments
• Vance says…

China’s yuan-denominated imports rose 19.6% year-on-year in the first quarter, while exports increased 11.9%, according to customs data.

Total trade (imports + exports) exceeded CNY 11 trillion for the first time on record, with growth marking the strongest pace in five years.

Australian business confidence collapses as energy shock crushes outlook.

Earlier:

• RBA’s Hauser warns of stagflation risk as energy shock hits economy.
• says not sure interest rates are at the right level to tame inflation, adds rates need to bring inflation to the 2-3% target and that Q2 headline inflation is around 5% due to fuel costs

Summary:

• Business confidence plunges to -29 (from 0 prior). Lowest since the GFC.
• Second largest monthly drop on record
• Business conditions down to +6 (prior +7)
• Sales ease slightly (+11 vs +12)
• Profits fall to +1 (from +4)
• Cost pressures surge, margins squeezed

Australian business confidence collapsed in March, posting one of the sharpest deteriorations on record as firms reacted to the economic shock…

Japan’s Katayama outlines global meeting agenda, offers no new policy signals.

Summary:

• Katayama to attend G7, G20, IMF, World Bank meetings
• Talks to cover financial markets and energy situation
• Japan signals readiness to support Asian economies
• Monitoring JGB yields, maintaining market dialogue
• Monetary policy decisions left to BoJ

Japan’s Finance Minister Satsuki Katayama outlined her upcoming participation in a series of international meetings in Washington, signalling continued engagement on global financial and economic developments, though her remarks carried little in the way of new policy signals.

Katayama confirmed she will attend gatherings of G7 and G20 finance leaders, alongside meetings hosted by the International Monetary…

UK retail boosted by Easter, but underlying spending weakens as fuel shock bites.

Summary:

• UK retail sales jump on Easter timing effect
• BRC like-for-like +3.1% y/y vs +0.7% prior
• Total sales +3.6% y/y vs +1.1% prior
• Barclays spending softer at +0.9% vs +1.0%
• Travel spending drops 3.3% y/y
• Consumers delaying purchases, building savings

UK consumer data for March painted a mixed picture, with retail sales boosted by seasonal factors while underlying spending remained subdued as higher fuel costs linked to the Middle East conflict weighed on households.

Figures from the British Retail Consortium (BRC) showed a notable pickup in retail activity. Like-for-like sales rose 3.1% year-on-year, accelerating sharply from 0.7% in February, while…

Summary:

• Recession risks seen rising if war persists
• Global trade growth downgraded to 2–5%
• Growth driven more by prices than volumes
• Supply chain risks flagged by majority of exporters
• Firms adapting via stockpiling and diversification
• Eurozone downside growth seen near 0.2%

Recession risks are expected to become more pronounced later this year (US fall season) if the Middle East conflict continues, according to Allianz Trade’s head of economic research, Ana Boata, who warned that the economic fallout is building steadily as the crisis drags on.

Speaking to CNBC on Friday, Boata stressed that timing is critical, noting that each additional week of conflict erodes corporate confidence and increases economic costs. The cumulative effect…

• Trump: We were called this morning by the right people from Iran
• Iran thought they were close to an agreement on Sunday morning - report
• Fed's Goolsbee: Oil futures show this will be a short-run problem (why he's wrong)
• US March existing home sales 3.98m vs 4.06m expected
• Iran officials are studying abandoning enrichment - report
• OPEC says output fell 7.7 mbpd in March. Keeps demand forecast relatively stable
• Canada February building permits -8.4% vs -2.1% expected
• US naval blockade said to not impede neutral transit to or from non-Iranian destinations
• ECB's Vujcic: Energy prices still very close to baseline scenario

Markets:

• WTI crude oil up $1.15 to $97.79
• US 10-year yields down 1.8 bps to 4.299%
• Gold down $4 to $4743
• S&P 500 up 1.0%
• NZD leads, JPY…

Miran is speaking soon. He is a political appointee and a motivated speaker for rate cuts. His views are irrelevant and he is ignored by sober members of the FOMC.

Chinese trade data the focus otherwise today. China’s export momentum is expected to have eased in March as the boost from AI-driven demand runs into the headwinds of rising geopolitical tensions and higher energy costs linked to the Iran conflict. A Reuters poll forecasts exports grew 8.6% year-on-year in dollar terms, a sharp slowdown from the 21.8% surge seen across January and February.

The month represents an early test of whether strong demand for AI-related goods, such as semiconductors and servers, can offset the drag from the global energy shock following Iran’s closure…

• Both the S&P and NASDAQ indices close above 100 day moving averages
• Isreal wil announce its commitment to a ceasefire at 4 AM Beirut time
• Crude oil futures settles at $96.57. Down sharply on the week
• US March Budget deficit for March -$164.00 billion versus -$156.75 billion estimate
• Israeli Broadcasting Authority Netanyahu approves every attack launched in Beirut
• Baker Hughes rig count -3 at 545
• Fed Nominee Warsh nomination hearing will be delayed
• Major European indices close mixed. Higher for the week.
• Trump to the NY Post: Preparing military if Iran fails to comply in talks
• CNN. Trump had a "tense" call with Netanyahu on Lebanon
• UMich preliminary April consumer sentiment 47.6 versus 52.0 expected
• US February factory orders 0.0% vs -0.2% expected
• <a…