Wealthion Macro Bites 5-6

Axios reports the U.S. expects an Iranian response within 48 hours regarding key points of a one-page, 14-point memorandum of understanding to end hostilities and commence a 30-day negotiation period. Key points include both countries lifting their respective blockades of the Strait of Hormuz in exchange for U.S. removal of sanctions (and release billions in frozen Iranian funds) and Iranian commitments to a 15-year moratorium on uranium enrichment and transfer of its stockpile of highly enriched uranium outside of its borders (potentially to the U.S). Iran’s Press TV cited IRGC Navy command in stating, “With aggressor’s threats neutralized and new protocols in place, safe, stable passage” through the Strait will be ensured.

Ambrose Evans-Pritchard writes in The Telegraph that incoming Fed Chair Kevin Warsh will free the Fed from the outdated Keynesian cult of CB’s basing monetary policy on “anchored inflation expectations,” rather than focusing on real economy factors such as monetary data, fiscal excess and output gaps. In 2008, central banks erred in focusing on the $147/b oil price and rising inflation expectations instead of looking through the commodity shock to focus on the real economy. The ECB raised rates and the Fed tightened (by talking up the yield curve) even though the eurozone was in recession and the U.S. credit market was freezing. We do not expect Chair Warsh to repeat these policy errors!

The Commerce Department reports the U.S. trade deficit increased 4.4% m/m to $60.3B in March. The value of imports rose 2.3% due to increased shipments of motor vehicles and consumer goods and record imports of capital goods for the AI buildout. Exports increased 2% in March due to record shipments of industrial supplies such as oil and other petroleum products. Exports of foods, feeds and beverages were the strongest since ’22.

Following the 5/1-5/5 Chinese Labor Day holiday, metals prices rose across the board. As of the midday close on Wednesday, SHFE copper gained 1.65%, aluminum +1.17%, lead +1.74%, zinc +2.24%, tin +6.6%, nickel +3.86% and lithium carbonate +6.59%. SHFE gold gained 1.84% and silver +5.15%, platinum +4.14% and palladium +4.42%.

Euro Stoxx 50 +3.5%, S&P futures +0.9% and Nasdaq futures +1.5%. European bonds trading higher, with yields falling 7bps (Ger.) to 13.4bps (Italy) across the board. 10-year treasury yield -7.7bps (4.347%). DXY dollar index -0.65%, spot gold +3.0% and spot silver +5.65%. Brent futures -9.5% ($99.22) and WTI futures -10.3% ($91.73).

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