•Meanwhile markets, this morning’s ‘Iran war is over soon’ relief rally is still intact, though some cracks have started to emerge;

•Markets are still going on Trump’s remarks that the war will end in weeks. To spike and juice the rally, Trump called for a prime time address to the Nation at 03:00 our time (CET that is). We don’t know anything detailed about his address. I would stress that Trump’s latest deadline for Iran to reopen the Strait of Hormuz of April 6 is still almost a week away;

•Furthermore, it’s not all love, peace, and happiness. According to the Wall Street Journal, the UAE is lobbying the UN Security Council for a resolution to reopen the Strait by miliary force. Meaning a broader war with Iran. While I am pretty sure that the Russians will simply veto the resolution, the Chinese have something of a dilemma. China with Pakistan is trying to get a peace deal. Can Beijing vote against a resolution that is designed to deal with Iran’s unlawful blockade of the Strait?

•Secondly, let us not forget about the increased US military buildup in the Middle East. While it’s a far cry from 2003 Iraq war levels, it does suggest to the world that Trump is still willing to escalate;

•By now, you now the drill with the war – back and forth between peace hopes and an enduring quagmire. According to an insightful article on Axios, that’s precisely Trump’s plan. With Iran’s leverage over the Strait and the regime intact, Trump’s got a weak hand. The best thing he can do is to keep everyone guessing. The quote in the article is too beautiful not to share here: “this isn't 3D chess — it's 12-dimensional. He contradicts himself regularly, so nobody knows what he's thinking. It's on purpose.”

•If you want to make sense of Trump’s contradictory statements, turn to fideism. Fideism is having faith not because of reason, but because of faith. If that sounds a bit too cryptic, think about it like this. You believe in something because you have faith, not because logical reasoning made you believe in the first place. Same with Trump. You either believe he will escalate or de-escalate. Trying to figure out Trump’s actual policy preferences by studying and parsing his remarks and reading the news is a fool’s game. Maybe insights could be gained from more less obvious sources. Or maybe the proof is too obvious – staring us in the eyes but we don’t recognize it as such;

•I still believe in the notion that Trump wants out, and that the war will be brief, and that it should end in weeks or a month. On days like this, you feel like a hero if you preserve with that call. But who knows what tomorrow will bring. More importantly, the Iranians and Israelis have agency too. It’s not all about Trump, which is what he – Trump – wants us to believe;

•Turning to some market commentary, US Treasury yields are off the lows, with the 10y having rebounded from 4.26 to 4.285. That’s still way below the high of the week, which was 4.42;

•Crude is negatively correlating with bonds and equities (yesterday the negative correlation didn’t apply). Brent crude futures plunged below $100 a barrel on the Trump truce headlines, sending bonds and equities soaring. Crude was trading at around $103 at pixel time. Which is still quite the TACO-move since we were approaching the $120 level yesterday. Come to think of it, it seems that $120 is the line in the sand for Trump;

•ECB rate hike pricing for the April Governing Council meeting has sagged further, with the ESTR for that meeting at 2.06. Meaning we’re at about 50/50 odds of a hike/hold. ESTRs are supported by more dovish ECB-speak – again from the hawks it must be emphasized. Irish central bank head Makhlouf, who’s a hawk plain and simple, cautioned against rapid moves by the ECB;

•ECB-speakers talking down prospect of a hike soon in no way means that April is going to be a hold. The ECB simply wants to have discretion of holding or hiking, which is best suited by markets pricing in about 50/50 odds. So, we’re priced to perfection;

•Equities are still holding on to big phat gains. The Stoxx 50 is up 2.7%. And at 5,721, we’re a whiff above the 200-DMA now. S&P 500 futures are loitering near the highs of the day;

•Looking ahead, eyes will be on US economic data (including the monthly ISM manufacturing survey), more Iran headline watching, and Trump’s address to the nation. I am not expecting anything big. But that’s just a gut feeling. I have an inkling mid-May is more of a deadline for Trump than April 6. Mid-May he will travel to China for a state visit. Can he go meet his Chinese counterpart while leaving behind this mess he has created?

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