00:00Paul, I guess I've seen I've seen various words being used to describe the ceasefire, wobbly, shaky, nervous, all of
00:06those in in notes from from analysts recently.
00:09And with that as the backdrop, markets are nervous about what comes next.
00:16Yeah, markets are nervous. We had the huge rally in equities and the drop off in crude oil prices, of
00:23course, yesterday.
00:24Now we sort of have come into more of a holding pattern, a little bit of nervousness.
00:29There was lots of confusing headlines over the past 24 hours about, you know, which missiles are flying in which
00:36directions, what's got hit, what was agreed in terms of that ceasefire, what's involved.
00:41Does it include Lebanon and so on and so forth? So a lot of confusion in the market.
00:46What I think is absolutely critical and what people are keeping their eyes on are those tankers sitting in the
00:51Strait of Hormuz and whether they're going to start coming out anytime soon.
00:55In particular, we've got our eyes on a couple of Chinese ships, which seem to be kind of at the
00:59front of the queue, not moving forwards at the moment, I don't think.
01:03But those, you know, that's what the market is really laser focused on to give that idea of whether there
01:08will be more of a release of energy and energy products into the market that would justify the lower crude
01:12oil prices.
01:14Paul, even if even if it holds, even if the conflict is over, do we have our arms around yet?
01:21Does the market have its arms around? Yes. The economic impact that we are going to see flowing out from
01:26this conflict.
01:29Yeah, so it's really difficult to tell. We just heard from the Fed's Mary Daly and she was talking about,
01:35you know, the fog that the policymakers are dealing with here.
01:39You know, will the economy rebound right away? Hard to tell. You know, you look at the numbers for Japanese
01:43consumer confidence, for example, that we had today, which showed the steepest drop since COVID.
01:49So, you know, there's been a really fall off the cliff in terms of consumer. They are going to be
01:53paying higher prices at the pump for now and higher prices for airfares and stuff like that.
01:57I think what's critical and we heard from the New Zealand Central Bank chief and a brain and talking about
02:04this on the television this morning.
02:05What I think is important is whether it's headline inflation, which they know is going to be elevated because the
02:10energy prices.
02:11But if that feeds into core inflation as well. And if they are, you know, so there's secondary effects, then
02:16that's more troublesome for central banks.
02:18And if it hurts consumers' confidence and reduces spending as well, then likewise, that will cause more longer term damage.
02:24OK. And, Paul, that takes us on to interest rate differentials and why the gains we saw during the war
02:30with for the U.S. dollar might be called into question as if we can hold on to this ceasefire.
02:36What are you hearing on the FX markets?
02:39Yeah, so I think it's really interesting what our options strategist has been writing about today.
02:45Two currencies quite different to one another in terms of their performance during the war over the last month, both
02:51getting a lot of interest in people looking for options to buy to take advantage of price rises for the
02:58Chinese yuan on the one hand and for the Korean yuan on the other hand.
03:01The Korean yuan is under a lot of pressure and is now rebounding rapidly.
03:05That's a big energy importer. But people looking for gains there.
03:08And then on the other side, the Chinese yuan, which has already been performing strongly, people seeing an opportunity there
03:13for further gains as well.
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