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Contact UsAFS Markets Blog: morning 04/02/2026
AFS morning commentary
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- Meanwhile in markets, bonds and rates remain boringly steady – all the action is taking place in commodities and equities;
- The latest event for bonds, the nomination of Fed Governor Warsh as Fed Chairman, has yet to move the dial. While Bloomberg ran a story on option trades hedging for a dovish Warsh (wasn’t he supposed to be a hawk?), forwards and spot OIS have barely budged, still pricing in 50bps in cuts for the year. UST yields have moved to the upper band of their recent trading ranges, though we remain comfortably below the highs of 2025 (which weren’t that high to begin with);
- Eurozone govvie yields have grinded higher this year, with the 10y and 30y Bund yields at record-highs (highest since 2011 for the 30y, close to the highest level since 2023 for the 10y). However, the outright yield increases this year are very modest;
- In FX, with the greenback having stabilized, we’re back to watching yen weakness. Following Prime Minister Takaichi’s dovish intervention on Monday, USDJPY has rallied. At 156, we’ve retraced about half the intervention talk induced plunge (remember, USDJPY plunged late last month on rumors that the NY Fed was checking prices in the cross);
- US equities closed lower yesterday, with the S&P 500 shedding 0.8%. Asian equities are mixed this morning, with Chinese markets up but equity markets down. This is no rout – at least not for the broader market – as S&P 500 futures are already rebounding off the lows;
- Big losers in equity space are software and publishing names, the so-called AI losers as they could see their business eroded by the ubiquitous large language models. Wires mention a Goldman Sachs basket of AI-losers, which was down six percent yesterday on reports of the release of a new AI tool by Antrophic. Note that last week, we had a similar sell-off in game publishers after vids on AI-made ‘games’ did the rounds. Notice I say games, because AI did not (yet) make a real and full game;
- Elsewhere, Brent crude is trading in the high $60s a barrel, having failed to break through the psychological level that is $70 a pop. Crude has benefited from the US-Iran standoff. But with the tension not being ramped up further, the rally has been contained so to say;
- Regarding Iran, Axios ran a story that only the Israelis are in support of a military strike (or strikes) on Iran, while the administration, and President Trump in particular, wants to hold off for now and prefer talking. At the same time, another report mentioned that Iran is willing to talk with the US, but directly and not brokered by a third party (the honest broker) or with Arab nations in attendance to observe;
- Still, the Iran stand-off is a powder keg ready to blow up as two recent incidents show. According to Reuters, a US navy jet fighter has shot down a drone that approached the carrier USS Abraham Lincoln in the Arabian Sea yesterday. One wonders how close the drone got, and if it managed to get past the screen of destroyers protecting the carrier. Secondly, Iranian small boats harassed a US-flagged tanker in the Strait of Hormuz before it was escorted to safety by US warships (also on Tuesday);
- Gold has managed to eek out further gains, with the precious metal solidly back above $5,000. That’s either a dead cat bounce, or perhaps the start of another bull run towards wuthering heights;
- In other news, the US government shutdown, a brief one fortunately, has come to an end after President Trump signed a funding bill;
- Looking ahead, we have Eurozone CPI and PPI figures on tap, which should be more of the same: underlying inflation several tenths of a percent above target. The main event is the US ISM services PMI for January, which should edge down to 53.5 from 54.4 according to consensus. Finally, the National Bank of Poland is expected to cut rates by 25bps today.
