00:00It's an odd day. Oil prices are down, equities are up, that function makes sense.
00:06Bonds are modestly bid as well, and yet nothing has fundamentally changed in the Middle East.
00:10If anything, it gets worse.
00:13What is the key catalyst right now?
00:15Is it the fact that there is a bit of oil that is getting through Turkey from Iraq,
00:21or is it the chip store? Is it semiconductors? Is it what's happening in Korea and Asia?
00:25I think in terms of some of the upside we've seen for equities today,
00:28I think definitely part of it is the stabilisation that we've seen in oil prices.
00:32Underlying earnings momentum does remain relatively strong.
00:35We've also seen the market just become a little bit more immune to some of the developments in the Middle
00:38East.
00:39This is allowing traders to re-enter some of their favourite trades that we've seen in 2026.
00:44Let's not forget, it was already a relatively bullish equity backdrop before this.
00:48I think the source of concern for me is just how long energy prices do stay high,
00:53because even if they need to really come down,
00:56because if they stay high, and they're still significantly higher than they were pre-conflict,
00:59and there's energy implications from a macro perspective,
01:03they'll continue to compound on themselves.
01:05And that will begin to show up in the data, and that could refocus mines.
01:09And like I say, we're not really too much closer towards getting an off-ramp to reopen the Strait of
01:13Hamus.
01:14We've still got Iran attacking energy infrastructure in the Middle East,
01:17and we've still not really got a clear timeline of what the US is looking to achieve here.
01:21And so in the mix of all of that, we get a Fed rate decision, Adam,
01:24which I'll point out as a public service announcement.
01:27Of course, in Europe, it comes an hour earlier than we are used to, so we'll be alert to that.
01:31But what is the big picture expectation that you have going into the last Powell press conference, probably?
01:38I mean, we don't really know how the confirmation of its successor happens.
01:43Yeah, so I think, obviously, with the Fed, they've got a dual mandate,
01:45so we can see how they balance upside inflation risks and downside risks in the labour market,
01:50and kind of how that exposes itself onto the dot plot.
01:53You know, in terms of short-term trading opportunity, a lot of attention is on,
01:56do they keep that one cut or do they remove it?
01:59But, you know, what I would say is that, at the best of times,
02:02those dot plots have relatively limited predictive power.
02:05And, you know, given that we're going to see a lot of messaging about how uncertain the Fed is about
02:09the path ahead,
02:09those, you know, dot plots are of even less consequence,
02:12particularly when you consider that, ultimately, this was a bit of a lame duck Fed.
02:17They weren't expected to cut until later in the year anyways.
02:20And then, I think, you know, when you consider the market's already moved quite a fair bit
02:24and done a lot of repricing for the Fed,
02:26I don't think there's going to be too much traction in the market.
02:29Ultimately, the Fed is doing what we're all doing,
02:30and that's waiting to see how events play out in the Middle East.
02:33When you look at the European central banks, the ECB, the BOE, reporting as well,
02:39deciding tomorrow, are we on Wednesday?
02:41Yeah, tomorrow is Thursday.
02:43Is it that markets are bound to be disappointed?
02:46Is it that central bankers just can't be hawkish enough?
02:50Yeah, I think, you know, what we saw since the onset of the conflict
02:52was this really mechanical relationship between rates and energy prices,
02:56where we almost trade them on basically a tick-by-tick basis.
02:59And a lot of that was, you know, a clamor to kind of reprice,
03:01a rerun of the 2022 Ukraine playbook.
03:04But, you know, as we've discussed previously, laid markets are a lot weaker.
03:08That dampens the chances for second-round effects.
03:11Policy is already more restrictive.
03:12And some of the rises in energy prices have been a lot less disorderly.
03:16So I think, you know, markets may have got a little bit over their skis,
03:19and we'll kind of see that be brought into focus with central banks this week.
03:22We'll also be attuned to the negative growth implications.
03:25Okay.
03:25Adam Linton from our Greenberg Markets Live team.
03:28Thank you so much for that.
03:30And remember, you can get up-to-date analysis and insight from Adam and the rest of the team
03:34by going to MLIV Go on the terminal.
