Wealthion Macro Bites 4-22

The true situation in the Strait of Hormuz has become obscured by the fog of war. On the political level, President Trump extended (indefinitely) the expiring ceasefire citing lack of coordinated response from Iran’s increasingly fractured leadership. Iranian U.N. envoy Amir-Saeid Iravani responded Iran will not open the Strait or restart peace talks until the U.S. naval operation ends.

On the military level, Iranian state TV reports the IRGC seized two ships (MSC Francesca and Epaminondas) and brought them to shore “for inspection,” while the U.K. Maritime Trade Operations reports Iranian gunboats fired on a cargo ship and a container ship in the Strait. Finally, analytics firm Vortexa reports two Iranian flagged supertankers (Hero II and Hedy) evaded the U.S. blockade and passed through Hormuz into the Arabian Sea.

Rifts are emerging between the U.S. and its allies over the U.S. drive to establish floor prices for critical minerals to encourage their global development and try to break China’s stranglehold on these materials. The Financial Times reports various U.S. allies are concerned blanket price floors may increase costs for their domestic businesses (such as defense, automaking and clean energy) and trigger retaliation from China. U.S. Trade Representative Jamieson Greer told the FT, such concerns over “cost efficiency” are the reason the West is “in the situation we are in,” and we all need to “pay a national security premium to have a secure supply chain.”

In an encouraging development for Fed protocol, Chair nominee Kevin Warsh told the Senate Banking Committee he would implement “robust reforms” to the Fed’s frameworks and communications. Warsh said he would rather have “messier” policy meetings to hash out disagreements around the FOMC table and less public commentary ahead of time. “Too many Fed officials opine about where interest rates should be. That is quite unhelpful.” Warsh also argued the Fed needs “a new and different inflation framework” to better gauge inflation trends, and “needs to find a way in which we can take the balance sheet and make it smaller.” We could not agree more!

Euro Stoxx 50 -0.15%, S&P futures +0.55% and Nasdaq futures +0.7%. European bonds ticking higher with yields falling 2bps-3bps across the board. 10-year Treasury yield -2.2bps (4.270%). DXY dollar index little changed, spot gold +0.7% and spot silver +1.8%.

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