•Meanwhile in markets, bonds and equities are crawling higher while crude oil futures prices are sagging towards the $100 a barrel level. There’s some optimism on US-Iran talks in the sense that punters are less gloomy on the prospect of a deal, which is boosting sentiment;

•Over the weekend, President Trump rejected Tehran’s latest peace proposal – no surprise here. And while he threatened Iran with military action if it “misbehaves”, on the part of Trump I detect even more unease with resuming the war. So yes, peace talks are gridlocked, but if you did believe that after years – if not decades – of animosity between the US and Iran that they would reach a deal right after a dirty war, I have this bridge to sell you. Furthermore, while oil was spiking last week, peace deal attempts were obviously ongoing in the background;

•Perhaps cynically, I think peace talks dragging on is good news for equities. It simply means more headlines to rally on. Reminiscent of the Trump 1.0 trade war, when markets were juiced by ‘trade talks are going well headlines’, I think we’re seeing a similar pattern here;

•In the meantime, the US is concocting a plan to allow neutral ships to resume transiting the Strait of Hormuz according to a social media post by our dear President. Because of the fog of war, it’s not clear what the scheme actually entails. According to Bloomie, US central command said it is ready to provide naval escorts. However, a story in the Wall Street Journal suggests there will be no naval escorts at all. Instead, the plan would only entail a ‘coordination process’ of shipping and insurance organizations. Meanwhile, the Iranians warned that any US interference in the Strait would constitute a violation of the cease fire;

•In other news, ECB doves are starting to lean against rate hikes. Greek Governing Council member Stournaras called fears of a recession in the Euro Area “real and justified.” Given the ECB’s unfortunate history with energy-driven rate hikes trigger recessions (2008 and 2011, not 2022 which was different), that’s a strong card to play against a June hike. Still, Stournaras did say that if inflation rises a bit too much, that will justify a moderate tightening response;

•And since we’re discussing the weakening Eurozone economy, let’s not forget about President Trump’s out-of-the-blue announcement on Friday to raise tariffs on European autos by 25 percent. Or perhaps not so out of the blue as the President has become deeply annoyed by German Chancellor Merz bluntly voicing his displeasure with the Iran war, dubbing it amateurish. Recall that Trump has ordered 5,000 US troops to be withdrawn from Germany while threatening to remove even more troops and military assets from Germany;

•Turning to some market commentary, US Treasury yields are flattish, thus trading near last week’s lows. More importantly, the US 30y has managed to stay below the 5.00 level, which is widely seen as a key resistance level. S&P 500 futures are flat while Asian equities are higher. Following Japan’s FX intervention last week, the yen remains bid, with USDJPY trading in the mid-156s, down a full phat five points from pre-intervention highs. Brent crude futures have fallen gradually to about $107 a barrel;

•With tech leading the recent equity rally, Bitcoin is going places. The cryptocurrency blasted past $80,000, reaching its highest level in three months. Furthermore, the charts suggest we could soon test stiff resistance at the 200-DMA of around $83,500;

•Looking ahead, besides the usual Iran headline watching, punters will be eying lots of central bank speak this week. Every day we have a full batch of ECB-speakers and Fed-speakers. Key economic data points include Friday’s US payrolls, which should point to the labor market stabilizing. We also have several central bank meets this week, starting with the Reserve Bank of Australia tomorrow, the National Bank of Poland on Wednesday, then the Riksbank, Norges Bank, and Czech National Bank on Thursday. Should all be holds, except for the RBA, where consensus expects a 25bps hike.

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