I’m losing track of which distraction to focus on. Do we watch Iran, which was a distraction from Esptein? Or Melania’s comments about Epstein? Or Trump’s attacks on the Pope, a distraction from both? Should I instead do a deep-think about no taxes on tips after ‘grandma doordash’ delivered Mickey D’s to the WH? And what about Swalwell and Gonzales, both resigning after stomach-turning sexual harassment charges came to light? Wait—what about Kamala talking about running again, and leading in the latest Democratic candidate poll ( sadly, I am not making it up). Meanwhile, hockey and basketball playoffs are starting, the Pitt finale is Thursday, and this weather is making me itch to play golf.
All of which is background noise as I seem to spend 25 hours a day trying to keep up with, let alone absorb and assimilate the absolute tsunami of news and the market reactions, all whilst trying to remain hopeful the Jets dont screw up this year’s draft.
But, I digress.….
The US-Iran conflict continues to dominate markets as a fragile ceasefire shows signs of strain, with Pakistan working to arrange a second round of peace talks
President Trump said Iran reached out to his administration over peace negotiations, even as the US began a naval blockade of the Strait of Hormuz . Vice President JD Vance accused Iran of “economic terrorism” over its blocking of the strait.
The dollar is weakening for a seventh consecutive day on hopes of renewed diplomacy , while investors increased allocation to the dollar in April amid ongoing conflict, according to Bank of America’s latest survey .
The IEA warned that the Iran war shock will trigger the sharpest drop in global oil demand since Covid-19, with oil demand destruction spreading on scarcity and high prices .
Iraq said it has “understandings” with the US and Iran to reduce the impact of the Hormuz blockade on Iraqi oil exports. Trump said 34 ships passed through the Strait of Hormuz on Sunday, the highest number since the closure began. Iran has reportedly implemented a tiered system for passage through the strait, with ships carrying Iranian oil passing freely, ships from friendly countries paying tolls of $1 million or more, and ships from unfriendly countries blocked altogether.
Markets are shrugging off geopolitical risks as traders buy the dip, with US stocks untangling from oil . The fact that the US stock market not only avoided declines but gained over 1% after the weekend’s bad US-Iran news is hugely significant . Stocks show multiple signs of a bigger bull run ahead, with Monday’s rally despite failed negotiations indicating a willingness to ignore tail-risks to gain short-term upside .
The bar for earnings looks way too high this time, with earnings likely to fall short of lofty expectations and stock valuations offering less room for error . Most of the 11% EPS growth forecast for this year isn’t expected in Q1, but the period is bound to set the tone . Consensus is for profit growth of about 2% year-on-year, or 10% sequentially .
UBS now expects the Federal Reserve will likely deliver just one interest rate cut this year instead of two amid the oil price shock from the Middle East conflict; Treasury Secretary Scott Bessent said the US should “wait and see” before lowering interest rates. Most investors continue to expect the Federal Reserve to cut interest rates in the next 12 months; 58% of investors expect rate cuts, according to Bank of America’s April global fund manager survey.
European markets are trading higher, with the Stoxx Europe 600 gaining 0.6% in morning trading . Germany’s DAX climbed 1.1%, France’s CAC 40 increased 0.4%, and the FTSE 100 added 0.3% . In Asia, markets are beginning to claw back war losses on easing tensions . The Hang Seng Index rose 0.8% , while Asian stocks rallied broadly on lingering hope for a peace deal . The Nasdaq 100 is eyeing its best streak in years, looking set to notch its longest streak of gains since 2021 .
Cross-asset volatility persists as markets oscillate between risk-on and risk-off sentiment depending on diplomatic headlines.
The dollar fell for a seventh straight day, the longest streak since March 2024, down 0.2% on reports that the US and Iran could return to Islamabad for more talks this week .
South Korea’s Kospi rose 2.7% to 5,967.75, approaching the 6,000 level on eased Middle East tensions .
Bitcoin climbed toward $75,000, triggering $540 million in crypto liquidations with short sellers losing $440 million .
European natural gas jumped as much as 18% to €51.30 per megawatt-hour in early Asian trading on Monday after Trump said the US will impose a full blockade of the Strait of Hormuz. Asian LNG prices rose above $18 per million British thermal units late Monday as the US blockade looked set to prolong disruptions that have effectively cut off around a fifth of global LNG supply.
Qatar is mobilizing engineers and workers to resume production at the world’s largest LNG export plant following the ceasefire. Goldman Sachs warned that damage to Qatar’s LNG infrastructure could push global gas prices 50-100% higher.
Oil prices fell on Tuesday despite the blockade entering its second day, with markets appearing more optimistic over the chances of a long-term peace agreement. Brent is set to average more than $100 a barrel through 2026 if the Strait of Hormuz remains closed for another month, according to Goldman Sachs .
The Bloomberg Dollar Spot index fell for a seventh day, the longest streak since March 2024, down 0.2% on headlines that the US and Iran could return to talks this week .
The offshore yuan advanced Monday, capping its longest winning streak since April 2021 as the dollar fell six straight days . Emerging market assets declined as escalating tensions sapped risk sentiment, with the MSCI Emerging Markets Index falling as much as 1.2% in Asian trading .
Monday’s Significant Movers:
KKR: Closed up 7.6% for its best day in a year, leading the financial sector rally
Arrow Electronics: Rose 6.5% on Monday, the best performer among its peers, after Truist Securities upgraded to Buy with a price target of $183
Avnet: Rose 6.6% with call options tripling average volume after Truist Securities upgraded to Buy with a price target of $80
Nokia: Rose 9.3% on Monday, the most in 5 months, after Bank of America upgraded to Buy
ManpowerGroup: Up 7.9%, the most in 6 weeks, reversing the previous session’s loss
Goldman Sachs: Retreated around 3% as a revenue miss in fixed-income, currency and commodities outweighed a record haul from equities
Premarket Movers Tuesday:
Avanos Medical: Rose 66% in premarket trading after agreeing to be acquired by American Industrial Partners for approximately $1.272 billion
Tesla: Up 2.1% in premarket after UBS raised its recommendation to neutral from sell
Globalstar: Up nearly 14% in premarket as Amazon is in advanced talks to acquire the satellite operator
From Andrew Sarna this morning
Blue Owl, the focus of some of the worries, raised $400 million via a bond issue yesterday in the first deal of its kind in over a month. But over in Asia, a BlackRock fund suffered the first default by a borrower in its portfolio after a Chinese company failed to repay a loan.
Banks are in a weird spot- earnings so far are good, and will continue to be, in my opinion. But expectations are very high, and the specter of credit issues and/or rising prices fueled slowdown in the consumer space continues to hover. Exposure in banks is high, limiting the incremental buying power and flipping the risk/reward to the downside, both in absolute and relative terms. look for insurers and overall financials indices to outperform banks near term
‘AD Fund Management LP - Bank Analysis’ (Arya's Substack)
Cross-Asset Volatility
Staples continue to massively underperform
yikes, if true!
Will history rhyme? From my friend ‘Le Shrub’
Disclaimer: Opinions are mine alone and may change. It does not constitute an offer to buy or sell or a solicitation of an offer to buy or sell any security, loan or asset or to participate in any trading strategy. It is not intended to form the basis of any investment decision, should not be considered a recommendation, and does not constitute an offer or solicitation with respect to the purchase or sale of any investment, nor is it a confirmation of such terms.
