•Meanwhile in markets, punters are unfazed by a few choreographed love taps (tit-for-tat) strikes the US and Iran exchanged overnight. For the week, equities are up, bond yields are flattish while crude oil future prices are lower;

•Regarding the tit-for-tat-strikes – and remember, the fog of war is at work her – the US claimed it did “self-defense strikes” on Iran’s coastal military assets after three guided missile destroyers were attacked when they transited the all-important Strait of Hormuz. President Trump himself claimed that the US destroyed a few more small Iranian boats. At the same time, Trump said that the cease fire remains in place. No surprises here as he’s going to visit China’s General Secretary Xi Jinping in Beijing on May 14-15. From what I gather, China has a vested interest in the war ending and the Strait reopening. And Trump doesn’t want to be preoccupied by a war raging – remember he delayed the trip because of the war;

•The Iranians launched strikes of their own, with the UAE reporting its air defense responded to Iranian missile and drone attacks overnight. Tehran claimed it hit the US warships in self-defense, causing “significant damage”. Hard to verify, of course;

•So, the US and Iran are communicating by shooting at each other. But at the same time, normal lines of communication remain open. Iran is weighing Trump’s latest peace proposal and will likely deliver an answer through Pakistani mediators. Don’t expect a miracle – Tehran has already rejected large parts of the offer. But, and this is what matters here, the US has toned down some demands, and in its first response through the media, the Iranians haven’t rejected the proposal in its entirety;

•An important story overnight is that Gulf States have lifted their restrictions on the US’ escort mission (dubbed Project Freedom) of merchantmen trapped in the Gulf. However, Saudi officials are on the wires saying that the Kingdom won’t open its airspace for the Americans to resume offensive missions. Bottom line, the cease fire lasts, the talking isn’t over, and that’s why markets are so resilient;

•Turning to some overnight market commentary, Brent crude oil futures prices are trading at $101 last, meaning a decline of seven percent for the week, and way below Monday’s high of $115.30 a pop. US Treasury yields are flattish across the curve on a weekly basis, having erased peace deal optimism declines that were still with us yesterday;

•Equity gains for the week range from 1.5% for the Stoxx 50 and S&P 500 to nearly three percent for the Nasdaq and more than five percent for the Nikkei. Bund yields are down 1-6bps across a bull-steepening curve as markets mostly priced out a third 25bps ECB hike this year. With punters sticking with a glass-is-half-full view of the war, the broad dollar is down for the week, shedding more than half a percent against EM currencies. In the major crosses, yen gains stand out, with USDJPY still down about 5 points (trading at 156.84) because of several interventions by the Bank of Japan;

•Elsewhere, I take note of a strong decline in urea futures prices (urea is a key ingredient for fertilizers). Prices are down 16% from their peak, though still up more than 30% because of the war;

•Looking ahead, eyes will be on the latest Iran headlines as well as US monthly labor market data, which should be consistent with stabilization of the US labor market with moderate job gains. Focus next week will be on Trump’s visit to China and your usual coterie of central bank speak. The most important economic event is Tuesday’s US CPI.

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