- Both the S&P and NASDAQ indices close above 100 day moving averages
- Isreal wil announce its commitment to a ceasefire at 4 AM Beirut time
- Crude oil futures settles at $96.57. Down sharply on the week
- US March Budget deficit for March -$164.00 billion versus -$156.75 billion estimate
- Israeli Broadcasting Authority Netanyahu approves every attack launched in Beirut
- Baker Hughes rig count -3 at 545
- Fed Nominee Warsh nomination hearing will be delayed
- Major European indices close mixed. Higher for the week.
- Trump to the NY Post: Preparing military if Iran fails to comply in talks
- CNN. Trump had a "tense" call with Netanyahu on Lebanon
- UMich preliminary April consumer sentiment 47.6 versus 52.0 expected
- US February factory orders 0.0% vs -0.2% expected
- Internal rift threatens Iran’s unified front ahead of Islamabad summit - report
- Canada March employment report 14.1K versus 15K estimate
- US March CPY 3.3% y/y vs 3.3% expected
- Fed's Daly: If oil prices come back down, a rate cut is not out of the question
- investingLive European session wrap: Calmer markets ahead of US-Iran peace talks
- Iran does not offer any goodwill gestures on Strait of Hormuz crossing ahead of talks
The markets had a brief respite from the headlines from the Middle East with the release of the CPI and the later the Michigan Consumer Confidence.
The latest US CPI report showed a sharp headline acceleration driven primarily by energy, while underlying inflation trends remained relatively contained. Headline CPI rose 0.9% m/m, in line with expectations but well above the prior 0.3%, lifting the year-over-year pace from 2.4%. The surge was almost entirely due to energy, with the index up 10.2% and gasoline prices jumping over 21% on the month as geopolitical tensions pushed crude higher. Importantly, gasoline prices remain roughly 40% above pre-war levels, suggesting there could still be additional pipeline pressure in the near term—though that would likely reverse over time if a sustained ceasefire holds.
Beneath the surface, the core inflation data was more encouraging. Core CPI rose just 0.2% m/m for the second consecutive month, well below the 0.9% expected, with the year-over-year rate at 2.6% versus 2.7% expected. The supercore measure also eased to 0.18% m/m, reinforcing the view that underlying price pressures—particularly outside of energy—are moderating. However, supercore on a year-over-year basis ticked higher to 3.14%, highlighting that progress remains uneven. Meanwhile, real weekly earnings declined by 0.9%, reversing the prior gain and pointing to some pressure on consumers.
Overall, the report reflects a split narrative: a headline inflation spike driven by energy shocks, alongside a softer core backdrop that should offer some comfort to policymakers. Market reaction saw only modest USD weakness that quickly faded, with Fed pricing still indicating no rate moves this year. The key question going forward is whether the energy-driven rise spills over into broader inflation or proves temporary if geopolitical tensions ease.Later, a report from the University of Michigan on consumer confidence came in much weaker (at record low levels) due to the spillover impact from the war and the rise in gasoline prices. The preliminary April consumer sentiment index fell sharply to 47.6 from 53.3, well below the 52.0 estimate and marking the lowest reading on record. The decline was broad-based, with current conditions dropping to 50.1 and expectations falling to 46.1, as consumers across all demographics reported worsening views. The deterioration is largely tied to the Iran conflict and the surge in gasoline prices, which have jumped to around $4.15 nationally from $2.89 pre-war, weighing heavily on perceptions of personal finances, buying conditions, and the overall economic outlook.
Inflation expectations also moved higher, adding to concerns. One-year expectations surged to 4.8% from 3.8%, the largest monthly increase in a year, while five-year expectations edged up to 3.4%. Although long-term expectations remain relatively contained, the sharp rise in short-term expectations highlights growing anxiety about near-term price pressures. Overall, while sentiment surveys can be volatile, the drop reflects a meaningful hit to consumer confidence driven by higher prices and uncertainty, with potential for improvement if energy prices ease and geopolitical tensions subside
North of the American's border, Canada’s March employment report showed modest improvement, with jobs rising by 14.1K, roughly in line with expectations and a rebound from the sharp -83.9K decline the prior month, while the unemployment rate held steady at 6.7% (slightly better than the 6.8% expected). The gains were driven by part-time employment (+15.2K), while full-time jobs were little changed, signaling a labor market that is stabilizing but still lacking strong momentum. Sector data was mixed, with gains in “other services” and natural resources offset by declines in finance and real estate, while on a year-over-year basis health care led job growth and manufacturing lagged. Wage growth picked up to 4.7% YoY—the strongest since late 2024—highlighting persistent inflation pressures despite softer hiring trends. Regionally, results were uneven, with weakness in British Columbia and steady conditions in Ontario, while provinces like Manitoba and Saskatchewan showed strength. Overall, the report suggests a labor market that is holding together after early-year weakness, with elevated unemployment reflecting slower hiring rather than layoffs, and firm wages keeping inflation concerns in play.
Geopolitical developments in the Middle East this week were largely about positioning ahead of upcoming ceasefire and peace talks between Iran and U.S. delegates. Expectations are not for a sweeping resolution, but rather incremental progress—namely, reopening the Strait of Hormuz. Following the 14-day truce announced late Tuesday, a limited number of ships briefly transited the Strait, but renewed Israeli strikes on Hezbollah in Lebanon led to another shutdown. However, Israel now appears to be aligning with a ceasefire framework, helping pave the way for this weekend’s negotiations and raising cautious optimism for progress.
Markets responded positively to the de-escalation tone, particularly after President Trump stepped back from earlier rhetoric about “total annihilation” in his Easter Sunday message. U.S. equities rallied strongly, with the S&P 500 rising close to 4% and the Nasdaq gaining 4.68% on the week. Oil prices reflected easing supply fears, dropping nearly 15% as traders priced in the potential for improved flow through the Strait.
In FX, the USD weakened broadly, with gains seen across most major currencies: EUR +1.82%, GBP +2.04%, CHF +1.38%, CAD +0.69%, AUD +2.53%, and NZD +2.69%, while the JPY was the lone exception, slipping modestly by -0.16% against the dollar. Overall, the tone shifted toward cautious optimism, with markets leaning on the idea that tensions may ease, even if only gradually.
As we head into the new week, much will depend on the weekend news and hopes for more peace talks with the Strait of Hormuz open. It that can be done, it would be a step toward a lower oil prices and with hopes, a lower potential inflation environmen.
This article was written by Greg Michalowski at investinglive.com.