Now What??
morning musings 4.1.26- views from dauber island
“Never argue with a fool. Onlookers may not be able to tell the difference,” ~Mark Twain.
I continue to be amazed at the ‘holes’ in common knowledge
KEY THEMES
The Iran conflict narrative is shifting dramatically as optimism mounts that the monthlong war may be nearing resolution, triggering a powerful risk-on reversal across global markets . President Donald Trump said he foresaw ending the war with Iran within two to three weeks, suggesting the US had largely accomplished its military goals .
This de-escalation signal is unwinding the geopolitical premium that had driven oil above $100 and pushed the dollar to multi-month highs, with Brent crude briefly dipping below $100 before recovering to trade near $103 in a volatile session.
The benchmark EM equity index rallied almost 5%, its biggest daily gain since November 2022, while European stocks jumped 2% . However, central banks remain cautious about declaring victory on inflation—the Bank of England warned that Britain risks a financial crisis with roughly 5.2 million borrowers facing higher mortgage repayments after banks increased rates , while the ECB’s Dolenc suggested the euro-zone economy may already have worsened beyond baseline scenarios .
US futures rallying sharply this morning on hopes the Iran war may end soon; Trump scheduled to address nation this evening.
Markets trading higher pre-open, rates slightly lower. Note this may be a technical squeeze rather than genuine optimism; extremely bearish positioning in equity markets going into quarter-end was likely the main driver of Tuesday’s rebound, rather than a shift in investor sentiment over the Iran war, which has been oscillating hourly. Trump’s “two to three weeks” timeline faces skepticism: Despite the president’s claim that the war could end soon, strikes continue in Tehran, and no formal negotiations are underway . First Abu Dhabi Bank warns Trump’s narrative “remains as vague and incoherent as ever” .
The conflict continues despite peace rhetoric. Tehran was rocked by a fresh wave of explosions on Wednesday, as Israel struck Iran’s capital ahead of Trump’s planned prime-time address to the American public. Iranian Foreign Minister Abbas Araghchi said no negotiations were ongoing with Washington despite direct and indirect exchanges of messages.
NATO tensions are escalating. Trump said he is “strongly considering” pulling the US from NATO, according to an interview with the Telegraph published April 1 . Secretary of State Marco Rubio said the US will need to reexamine its relationship with NATO in light of the refusal by some European allies to allow American forces to use their military bases during the Iran war .
The war is reshaping global trade routes; African economies are registering sharp gains in trade, aviation and energy revenues as the conflict disrupts traditional shipping and air corridors, cutting traffic through the Red Sea and Strait of Hormuz by an estimated 90% .
Congress remains on recess despite mounting pressure. After House Republicans rejected the Senate’s DHS funding bill last week, there’s little sign the shutdown will end anytime soon, with both chambers out of session. Speaker Mike Johnson said he could not commit to calling Congress back early. TMZ and other outlets are tracking down lawmakers on vacation during the shutdown .
Energy
Some French gas stations ran dry as drivers rushed to fill up after fuel-price caps were introduced. Out of 900 stations that have run out of at least one type of fuel, 700 belong to TotalEnergies .
Japan launched a scheme to boost private investments in LNG supply. The state-backed Japan Organization for Metals and Energy Security will join Japanese companies investing in new or additional LNG facilities .
Ukraine will boost gas import capacity via Poland to 6.7 billion cubic meters a year by the end of April. The route provides Ukraine with access to LNG terminals in Poland, Lithuania and Germany .
Company News
Nike shares slid as much as 9.8% in premarket trading after the company said it expects fourth-quarter revenue to be down 2-4%, with inventory elevated in EMEA given the war in the Middle East and higher promotions across Europe
RH shares plunged as much as 17% in premarket after the upscale furnishing company forecast a 2%-4% first-quarter revenue decline, pressured by execution and supply chain disruptions .
Fed
Fed officials remain upbeat on growth despite new strains. New York Fed President John Williams told the Staten Island Economic Development Corporation that he expects the economy to expand at a 2.5% pace this year, above the Fed’s own median projection .
Kansas City Fed President Jeffrey Schmid warned there is a real risk inflation will get stuck closer to 3%, and the Fed must follow through with policy actions to validate stable medium-term inflation expectations .
Kevin Warsh nomination remains stalled. Jerome Powell’s term as Fed Chair expires May 15, and Kevin Warsh is nominated and ready, but the Senate has yet to confirm him .
Commodities
Oil recovered from an earlier slump in volatile trade with Brent earlier sliding below $100 a barrel before recovering most of that loss to trade near $103 ahead of Trump’s address to the nation .
Gold extended a three-day rally, rising as much as 1.7% to top $4,700 an ounce as traders shifted focus from interest-rate hikes to longer-term recession risk .
European natural gas fell to its lowest level in three weeks, dropping around 13% over two days as traders weighed signals on whether the US and Iran could soon reach a deal .
Silver collapsed over 11% to $79.23/oz in severe risk-off deleveraging.
Krugman warned that impending physical oil shortages could drive prices as high as $372 per barrel and trigger a worldwide recession despite current Brent futures hovering around $103- fwiw.
QatarEnergy reported that the Aqua 1 fuel oil tanker was hit by an Iranian cruise missile in Qatari northern territorial waters with the crew of 21 evacuated and no casualties .
FLOWS AND POSITIONING
The options market closed the first quarter with its most extreme dollar signal in years, with one-week risk reversals on the Bloomberg Dollar Spot Index showing their fourth most bullish quarter-end reading on record .
Default protection costs for Middle East nations’ sovereign debt fell due to rising prospects of the war ending soon .
Insurance being purchased for both tail moves, reflecting extreme uncertainty
Economy still has ‘issues’
Nick Timiraos
@NickTimiraos
Job openings for January were revised up, but the three-month moving average continues to gently grind lower through February
There were 0.9 vacancies for every worker counted as unemployed in February, near the low for the current business cycle.
Financials look like a buy here, based on sentiment and technicals. Private equity/credit is an issue, for sure, but that shouldn’t preclude putting money to work in the space
Private Credit remains an issue
The ‘excursion’
From my friend Le Shrub-a must follow on twitter and substack!!
Unexpected consequences, part 1: Japan deploys first long-range missiles as it steps up deterrence:Domestically built munitions with 1,000km range could reach Chinese coast (ft)
This could end up being the top stocking stuffer!!!
Watch this date; I expect the Republican candidates’ tone to change once they can’t be primaried
I am a visual learner, so these caught my eye
