00:00We sit here right now looking at U.S. futures, stock futures that look actually a little positive.
00:05European futures negative but improving. They've improved a little bit.
00:10Do you see reason for that bounce? Is the fact that we're seeing lower bond yields likely to be one
00:14of the reasons why we could see a bounce?
00:16Yeah, I think lower bond yields could potentially be placing a bit of a role.
00:19But in terms of like how this week is shaping up, it's always set to be a case of we
00:23have this deadline for U.S.-Iran talks next Monday.
00:25So what is the tenor of news flow that fills that gap?
00:28And if you look over the weekend, we've still seen Iran and Israel exchanging missile fires.
00:32We've seen the Houthi rebels enter the war now, which is particularly dangerous for, you know, potentially those Saudi oil
00:37exports.
00:38Bloomberg Intelligence says that if they're vulnerable, that could add $15 to $20 per barrel to Brent.
00:43And then, you know, we're also seeing the additional troop buildup by the U.S.
00:46So the tenor of news flow is relatively negative.
00:49And yes, we are looking to see how these U.S.-Iran talks develop.
00:52But ultimately, the negotiating positions are pretty far apart.
00:56I know we've seen Trump trying to interject today to say they're going relatively well.
01:00But I don't think the market's really kind of buying that at this stage.
01:02So what we're kind of really seeing today is, you know, U.S. stocks are higher.
01:06But that's pretty much what we've seen throughout the conflict.
01:07Every Monday, S&P 500 has closed higher, only for it to close lower at the end of the week.
01:12And I don't expect this week to be any different.
01:14But to Anna's point, yield's down both here in Europe and in the U.S.
01:18So it seems like higher energy prices aren't boosting ECB hiking bets anymore.
01:24Are we at peak hawkishness when it comes to the central bank?
01:26I think it definitely is positive.
01:28I think we saw some of this price action start on Friday with the U.S.
01:31We saw that kind of twist-steepening move in the curve, whereby, you know, front-end yields started falling.
01:36I think for the Fed, obviously, it's slightly different.
01:37They have a dual mandate.
01:38So they're probably more cognizant of the negative growth implications via the labor market.
01:43But like you said, yes, we are seeing European bonds follow suit now.
01:46And we saw gas prices, you know, open higher today, but not translate into higher energy, sorry, higher rate hike
01:53bets.
01:53And so I think we are seeing a bit of a breakdown in this mechanical higher energy equals higher inflation
01:58equals more ECB bets.
02:00And some of that has been aided by the ECB themselves.
02:03We saw Villaroy, you know, urging patients, Schnabel, who's one of the more hawkish members, she's definitely taken a more
02:08measured approach.
02:09So I think it's definitely something we are seeing signs of.
02:12I think for the, you know, we will see a bit more data capture this week.
02:15We've got the ISM data.
02:16We've got March payrolls.
02:17So, you know, if those come in soft, then I think we could see an increase in this trend, whereby,
02:21you know, front-end yields are dragged lower.
02:24I think for Europe, though, the back end is still maybe a little bit more vulnerable.
02:27I think, you know, we've seen signs of that.
02:29You know, we're in kind of higher sense territory again for the U.K.
02:32I think as, you know, European balance sheets are squeezed, having to take supportive measures, this could impact the back
02:38end of the European curve as well.
02:39OK. And let me ask about yen intervention, because in the midst of all of this, we seem to have
02:45got some commentary from the Bank of Japan that feels a bit like intervention.
02:49Remind us where we got to on the BOJ story then, Adam.
02:52Yeah. So, you know, obviously with this verbal intervention, you know, they're trying to, it does feel they're pushing against
02:57the string a little bit to some extent, because this isn't a speculative move.
03:01This is a fundamental driven move, given the terms of trade shock from higher energy prices.
03:06And ultimately, real rates are still very negative in Japan.
03:10So even if you do get BOJ hikes, you know, it's still going to be a difficult position for the
03:14yen.
03:15If you do see any yen rallies, they'll probably be ready to be short-lived.
03:18So, you know, we're going to get to the end of the year, and we're going to get to the
03:18end of the year.
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