00:00We have a ceasefire extension, but still a closed Strait of Hormuz.
00:05How do I price that in to global markets?
00:11With difficulty, Guy. Good morning.
00:13But what we are seeing, and I think increasingly so,
00:16is signs that the market is very minded to take an optimistic,
00:20a glass half full perspective on things here.
00:22So, yes, we had a little bit of a setback at the end of the U.S. day
00:26with the idea that we're not seeing J.D. Vance flying to Pakistan just yet.
00:31Then Trump came out and said that the ceasefire will be extended indefinitely.
00:34And the market is taking that not as some sort of sign that the U.S. is softening,
00:38but more as a sign that it's waiting patiently for Iran to sort itself out.
00:42And that actually in Iran there's some sort of disagreement,
00:46which Trump alluded to, between more moderate and more hardline elements.
00:49The market is holding on to the hope that the sort of more moderate approach will win out
00:54and that we'll be able to get to some sort of an agreement.
00:56And so you still see that with stocks hanging on in there
00:59and crude oil prices holding with Brent somewhere just around below $100 a barrel as well.
01:05Paul, there is this disconnect between the equity rally
01:08and what's happening on the inflation front.
01:09We've got a reminder of that with the CPI out of the U.K.
01:11that came in slightly stickier, slightly higher than the forecasts.
01:14We were speaking to the CEO of Axel Nobel, talking about pushing up prices.
01:18That's going to go through and feed through to their consumers.
01:21Because when does that gap close?
01:23When do the equity markets wake up to the inflation challenge?
01:26Or are they right to look through it at this stage?
01:31I think that there's two things.
01:32One, you're absolutely right to point out the real world impacts are growing from the crisis
01:36pretty much every day.
01:37At the moment, Tom, we're not just seeing it in inflation readings,
01:40but we're seeing it in larger and larger companies talking about impacts to their production,
01:45talking about cancelling flights if it's airline companies as well,
01:49and talking about the need to raise prices.
01:51So it is feeding now into the real economy.
01:54The market is looking through that and looking more to the optimism on the tech side in particular
01:59than it is still seeing it as, they whisper the word, transitory.
02:03We've heard that from central bankers, of course, before.
02:06And it proved to be a lot longer and stickier than they had hoped for.
02:09The market is still looking on the bright side of things.
02:12But at some point, if we don't get a resolution
02:15and we don't get oil starting to flow through the markets again,
02:17then there will be a wake-up moment for the market.
02:21What did you make of the war sharings, Paul?
02:26Yeah, interesting one, wasn't it?
02:27I mean, the biggest takeaway was probably the soundbite from Elizabeth Warren
02:30talking about accusing him of being a sock puppet
02:32and the fact that he had to sort of write that out and deny it.
02:37I feel like Bloomberg Intelligence's analysis is quite an interesting one to think about here.
02:43They sort of see him more as a little bit on the hawkish side,
02:46talking about the needs to manage inflation in the economy,
02:50talking a little bit less about the mandate on the employment side.
02:53And so they're thinking about it through that sort of lens.
02:56What I would say more broadly, though, is that the Treasury market
02:58is getting increasingly unruffled, not only with the wash comments,
03:02but also with the war in the Middle East, too.
03:04We're seeing implied volatility on that really falling down
03:07and the yield range that we're seeing in the Treasury market
03:10also slide that's helping credit outperform
03:11and also boosting those equities.
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