Limbo
morning musings 4.29.26- views from dauber island
Javier Blas at Bloomberg...from TACO to NACHO: “not a chance Hormuz opens”
Geopolitical factors aside, extending the limbo of ongoing mutual blockades is the worst of all worlds for the global economy: a continued shutoff of supplies, with geometrically increasing negative first-, second-, and third-order impacts, layered with timing uncertainty.
Inventories increased 1.4% last month vd 0.4% consensus. Expanding on my friend Peter Boockvar’s comments that chip buying may surge due to extensive pre-ordering to beat the Helium shortage, this inventory number likely reflects broader hoarding of components and supplies in anticipation of imminent shortages.
Divergences tend to….un-diverge.
Higher for longer being priced into crude oil
FOMC @ 2/presser @2:30. Alphabet, Microsoft, Amazon and Meta report after the bell.
Brent crude oil rose to $114 per barrel, stoking inflation and growth concerns . Oil prices remained above $112 a barrel after The Wall Street Journal reported that President Trump has instructed aides to prepare for an extended blockade of Iran . Brent crude briefly made its way back above $115 amid concern over a prolonged blockade in the Strait of Hormuz and US President Trump telling Iran it “better get smart soon”.
GS lifted its oil price forecasts as the prolonged closure of the Strait of Hormuz spurs extreme inventory draws, now expecting West Texas Intermediate to reach an average of $83 a barrel, up from $75 . Kepler’s head of crude oil analysis warns that should the waterway remain closed for another two months, prices for oil could go back to roughly $120-125 a barrel for Brent
The dollar could rise if the Federal Reserve comes across as hawkish by acknowledging the prospect of higher inflation due to the Iran war stoking energy prices
Ukraine confirmed a third strike on a Russian oil refinery in two weeks .
EU-China Trade Tensions: The European Union is moving to redraw the rules of industrial competition within its borders, setting the stage for a sharper economic confrontation with China . I
Hill Republicans want Trump to solve their internal problems . House infighting is threatening to sink the GOP agenda on Capitol Hill . If Democrats retake the House in the midterm elections, White House adviser Stephen Miller, former Homeland Security Secretary Kristi Noem and her former associate, Corey Lewandowski, are top of mind for subpoenas .
Fed widely expected to hold interest rates steady on Wednesday after a key policy meeting, likely the last chaired by central bank chief Jerome Powell. Fed-watchers will be watching for hints on the future policy path as money markets price a small risk of a rate cut this year . The Fed is likely to wait and see given the high level of uncertainty.
European rate curves are likely to steepen, as markets have already priced in three interest-rate hikes by year-end, building in enough premium, according to BNP Paribas’s 2026 global outlook report .
The euro area’s adjusted loans to nonfinancial corporations increased 3.2% year over year in March, following a revised 3% rise a month ago .
Germany’s IFO employment barometer dropped monthly to 91.3 points from 93.4 points, the lowest level since May 2020
M&A Activity Accelerates: Teva’s $700M+ Emalex acquisition, Shell’s ARC Resources deal, and CVC’s potential €9B Nexi bid highlight continued dealmaking despite macro uncertainty .
AI Spending Divergence: While J.P. Morgan forecasts $200B+ hyperscaler AI capex surge, OpenAI’s reported growth miss creates bifurcation between AI software and hardware stocks
COMMODITIES
The first liquefied natural gas shipment since the war in the Middle East began two months ago appears to have traversed the Strait of Hormuz to exit the Persian Gulf, with the Mubaraz tanker now passing the southern tip of India .
China’s imports of liquefied natural gas are expected to hit the lowest in eight years at around 3.5 million tons in April, about 30% lower from a year earlier, according to Kepler, as higher prices triggered by the Middle East war dampen demand .
A laden supertanker linked to Japan appears to have completed a transit through the Strait of Hormuz, in what may be the first successful attempt by an oil carrier from the country to leave the Persian Gulf since the Iran war began .
Asian refiners are contemplating 20-30% run rate cuts and accelerated maintenance schedules as dozens of crude tankers remain stranded in the Persian Gulf .g large positions .
On the heels of food prices + 7.9% in last PI< starting to see the war impact on grains. May Wheat futures +15% since war began as plantings plummet
‘US Threatens to Sanction Banks That Help China Buy Iran Oil ‘
‘The Day The Memecoin Dies’ (QTR)
‘Blue Owl Shares Near ‘Doomsday’ Levels See Earnings as Next Risk’
‘Junior Bankers Sick of Grunt Work Build an AI Tool to Do the Job’
‘“Sell in May” Would Have Been a Poor Strategy This Past Decade’
Some update on what’s in the mechanical pipelines
Yes, passive matters!
Fwiw, I’m watching consumer discretionary; when that group breaks, it means consumer is feeling pain and recession likelihood is rising sharply.
Is this time different?
Consequences of the supply chain dislocation are becoming more evident.
