00:00We see risk appetite getting a boost all over the place.
00:03Oil prices are now dropping, but even before that, we saw stock futures substantially higher for Europe.
00:08U.S. futures look a little higher. Asia's had a really good session. Your perspective?
00:14Yeah, so I think, you know, throughout the conflict, we have seen kind of this dip buying mentality on good
00:18news.
00:19And overall markets have been relatively resilient, which is indicative of when the conflict is over,
00:24there's a healthy appetite to buy stocks.
00:26And events over the past 24 hours have clearly been a positive.
00:30Iran is now signaling publicly a willingness to negotiate, which, you know, has caught some off guard
00:34because it didn't look like they had a huge incentive to with oil prices in triple digits.
00:39So yesterday may, you know, potentially have marked the bottom in markets for the conflict.
00:43And it makes sense for stocks to rally. But there's still quite a few hurdles for the market to clear.
00:48We still don't know what Israel's response are going to be. Are they going to stop activities in the region?
00:51We still, you know, don't know exactly what Iran's demands are.
00:55If they're the ones from last week, then there's a huge negotiating gap between them and the U.S.
00:59Then also we need to figure out what's actually going to happen with the Straits of Hormuz,
01:03because it doesn't necessarily seem like a massive priority from the U.S. to get that reopened.
01:06And that's the bit that makes it perhaps a surprise that we have oil reacting as well.
01:11We're just at 100 on Brent now.
01:13Are you surprised, though, that the FX moves are where things are relatively muted?
01:18Yeah, I'm not necessarily too surprised about the FX reaction.
01:22I think we saw, you know, from yesterday, we saw the kind of mechanical like sell the dollar move where,
01:26you know, risk appetite picked up and kind of undoing some of the move that was seen throughout the conflict.
01:31But to your point about, you know, Hormuz potentially still being closed,
01:35this is of note for the FX market particularly,
01:38because if people start trading relative growth aspects, as they have been doing,
01:42then all those countries which are net energy importers, you know, got the Eurozone, got the UK,
01:47it's not necessarily the all clear from them.
01:50And as we've kind of seen, you know, there is potential lasting damage for energy infrastructure,
01:54even if they do get Hormuz reopened.
01:57So therefore, you know, we may not see central banks be as reflective as equities are.
02:02And, you know, even if, you know, we do see some rate bets scale back,
02:05markets aren't really trading relative interest rates.
02:08It's all about the growth outlook.
02:09And the U.S. stands to still outperform relative to the rest of the world.
02:12OK, thinking about the growth outlook, this has become the most recent preoccupation of bond markets, hasn't it?
02:17So it's not necessarily about the inflation fears, as it was in weeks past.
02:21It now seems to be about growth.
02:22Is that how we interpret the fact that we see lots of bond buying,
02:26sovereign debt in Europe in particular this morning, and yields coming down?
02:29The Italian 10-year yield down by 14 basis points this morning.
02:32Yeah, it definitely makes sense that, you know, there will be some, you know, buying of fixed income products.
02:39You know, U.S. yields are lower.
02:41And I think for the U.S. it's a big story because it kind of could get them back on
02:44potentially cutting rates.
02:45But as you mentioned, you know, the market has been increasingly focused on the growth outlook.
02:49I think what the market now needs to see is actually where does Brent settle?
02:53If it still settles, you know, markedly above pre-conflict levels,
02:56that still does provide a growth headwind for the rest of the world.
02:59And as such, we may see some relative outperformance in U.S. paper relative to other markets.
03:04And that's what we need to watch going forward.
03:05Your colleague, Ven Ram, arguing oil above $120 a barrel would hold that next leg of bond selling.
03:11Adam, thanks for joining us.
03:13That's Adam Linton from Bloomberg's Markets Live team.
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