Futures Tumble On AI Spending Fears As Brent Hits 2 Week High

US equity futures are lower, dragged by tech, following a report that OpenAI missed revenue and user targets and there growing internal pushback against Sam Altman's notorious aggressive spending (the company has $1.5 trillion in commitment it won't be able to meet), which is hitting semiconductors and the broader supply chain. AS of 8:15am ET, S&P futures are down 0.7% and Nasdaq futures dropped 1.2% as concerns resurfaced over whether the vast amounts of investment in artificial intelligence will pay off. In pre market trading, Semis and Mag7 are under pressure. Defensives are leading Cyclicals ex-Energy. SoftBank, a key backer of ChatGPT’s owner, plunged 9.9% in Tokyo. US-based OpenAI partners including Oracle and CoreWeave fell in premarket trading. Nvidia was poised to drop 2.9% from a record high. Meanwhile, Brent rose above $111 a barrel, with the Strait of Hormuz still shut. Bond yields are 2-4bps higher as the yield curve flattens and USD appreciates, following the price of oil. Commodities continue to be led by Energy with WTI rising above $100/bbl after Trump signaled he was unlikely to accept Iran’s latest proposal to end the conflict which included a proposed a plan that would reopen the Strait of Hormuz while leaving questions about its nuclear program for later negotiations. There is material weakness in precious metals with silver’s underperformance possibly tied to Tech weakness. Today’s macro data focus is on weekly ADP, home price data, regional Fed activity indicators, and Consumer Confidence (though spending has de-coupled from sentiment). US economic data calendar slate includes weekly ADP employment change (8:15am), February FHFA house price index, S&P CS home prices (9am), April Richmond Fed manufacturing index and Conference Board consumer confidence (10am) and Dallas Fed services activity (10:30am)

In premarket trading, OpenAI partners such as CoreWeave (CRWV -7%) and Oracle (ORCL -7%) are falling after the Wall Street Journal reported that the AI startup recently failed to meet targets for sales and new users, reviving worries about spending ahead of tech earnings. Stocks linked to the buildout of AI infrastructure — from computing providers to the makers of semiconductors and power equipment used in data centers — are also down after the Wall Street Journal report on OpenAI.

Magnificent Seven stocks are also mostly lower: Nvidia falls 2% on the OpenAI report (Apple +0.4%, Alphabet -0.1%, Amazon -0.9%, Meta Platforms -0.8%, Microsoft -1.2%, Tesla -1.2%)
Celestica (CLS) falls 13% after the maker of electronic components reported first-quarter results that featured smaller upside to expectations than in recent quarters. While it raised its full-year forecast, analysts said the company had been facing high expectations.
Dynatrace (DT) gains 4% on a report that Starboard Value LP took a stake and is pushing the company to better capitalize on the shift to artificial intelligence.
Erasca (ERAS) slides 40% after the biotech said one patient withdrew from the trial after a severe treatment-related adverse event and later died, according to a filing.
General Motors (GM) rises 4% after raising its profit outlook for the year by $500 million, saying its pickups and sport utility vehicles continue to sell even as gasoline prices soar due to the war in Iran.
LendingClub (LC) rises 9% after the online lender’s first-quarter revenue and net interest income beat the average analyst estimate.
Nucor (NUE) rises 2% after the steelmaker reported first-quarter earnings per share that beat the average analyst estimate as steel shipments were stronger than expected.
Rambus (RMBS) plunges 17% after the semiconductor device manufacturer reported first-quarter results that were largely in line with expectations, which analysts said was a disappointment in the wake of recent strength in the stock.
Sanmina (SANM) rises 7% after the electronics contract manufacturing services company’s second-quarter results beat expectations and it gave a full-year outlook that is seen as positive.
Solaris Energy (SEI) rallies 5% after the firm’s first-quarter Ebitda beat the average analyst estimate.
Spotify Technology falls 11% after reporting results that underwhelmed Wall Street, forecasting operating income in the current quarter that missed analysts’ estimates.
UPS (UPS) falls 3% after the courier left financial guidance unchanged. Its profit beat expectations in the first quarter.

In other corporate news, Barclays traders struggled to capitalize on a volatile quarter with returns falling short of their US rivals. Eneos is said to be the last remaining bidder for some of Chevron’s Asian assets in a deal that might be valued at more than $2 billion. Google and the Department of Defense signed a deal allowing the Pentagon to use Google’s AI models on classified work, the Information reported.

Futures are sharply lower after closing at a new all time high yesterday. The market’s hottest theme took a knock from a report that OpenAI failed to meet internal targets, fueling internal concerns that it may struggle to support its spending on AI infrastructure, the WSJ reported. OpenAI partners including Oracle, CoreWeave and AMD fell in premarket trading, while SoftBank tumbled 10% in Japan. Resurgent optimism about AI had prompted the market's charge as the rest of the market lagged due to rising oil prices. Wednesday’s earnings from four hyperscalers will offer the rally another test.

“The single most important line item isn’t revenue or margins; it’s capex,” said Amanda Lyons, IT-sector lead and head of research at Energy Group Capital. “Any hint of slowing spend would be taken negatively for the ecosystem, but a sharp step-up would likely raise questions around returns.”

The WSJ report is reviving worries about how fast companies can monetize their huge AI spending (while still investing enough to compete), leaving Alphabet, Amazon.com, Meta and Microsoft with a delicate message to convey tomorrow. For context, OpenAI revealed in March that it was generating $2 billion in revenue per month, while Bloomberg has reported that Anthropic is on track for annual revenue of almost $20 billion.

“The rising oil price is starting to feature in macro data,” said Anna Macdonald at Hargreaves Lansdown. “The longer the crisis rolls on, the more severe the impacts will be, and the more we expect it will dominate investor attention.”

The AI theme is playing out in other ways too. Battery maker CATL raised $5 billion after a Hong Kong share placement amid surging demand for data center energy storage. The shares have soared 139% since their debut. And Arizona’s data-center building boom is coming up against community opposition and dwindling water availability.

Ahead of this week’s policy meetings by the Federal Reserve, ECB and Bank of England, traders expect officials to keep rates on hold. The outlook gets cloudier for subsequent meetings, with everything hinging on the duration of the Middle East war. Money markets see the ECB and BOE hiking as soon as June, while odds are for the Fed to keep rates on hold for the rest of the year.

Brent advanced for a seventh straight day. The White House said President Donald Trump will address a proposal from Iran to resume oil flows through Hormuz “very soon.” The dollar rose alongside global bond yields. WTI rose above $100 as tankers laden with Iranian oil idle just shy of the US blockade line. There’s not much sign of progress toward ending the war, with Trump planning to address the matter “very soon.” The president has told his advisers he’s not satisfied with Iran’s latest suggestions, the NYT reported, citing people briefed on the discussions.

European stocks have swung to session lows, with Stoxx 600 down 0.6%. European stocks swing between gains and losses on a busy earnings day, with healthcare weighing after Novartis missed profit estimates and reported its first sales decline in almost two years. The energy subindex is the best-performing sector as Brent rose above $110 again. Here are the biggest movers Tuesday:

SIG Group shares gain as much as 12%, the most since 2020, as the Swiss maker of carton packaging posted stronger-than-expected profits, putting it on track to recover from a challenging year
BP shares rise as much as 3.3% after 1Q profit beat analyst estimates. Analysts at RBC Capital note outstanding downstream and trading results
Nexans shares rise as much as 9.6% and on course to close at a new all-time high, after the cable and electrification specialist bolstered its position in the US through the acquisition of Republic Wire
AAK gains as much as 8.6%, the most since July, after the Swedish maker of vegetable oils and fats reported earnings. DNB Carnegie says the print is “strong on all points” with volumes growing and “good” free cash flows
Zealand Pharma gains as much as 7.2% after the Danish drug developer’s partner Boehringer Ingelheim said patients using its experimental obesity shot — called survodutide — experienced weight loss above 16% in a late-stage trial
Nordic Semiconductor gains as much as 9.1% after the Norwegian chipmaker reported its latest earnings. Analyst sees a strong report from the company, with a broadening out of revenue trends and strong 2Q guidance
Novartis shares fall as much as 5.1%, the most in more than a year, after the Swiss drugmaker reported weaker-than-expected core operating profit for the first quarter, as well as a drop in revenue
Barclays declines as much as 4.3% after the British lender booked an extra £105m provision for missold car loans and announced an impairment of roughly £200m for a “single name” charge said to be tied to the UK property lender Market Financial Solutions
Air Liquide fallsas much as 5.2% with analysts saying a miss in the French chemicals firm’s Large Industries division isappoints especially in light of hopes that the company could benefit from supply chain disruption in the Middle East
Valmet shares fall as much as 9.1%, to the lowest in more than a year, after first-quarter orders and adjusted Ebita undershot expectations, and the Finnish machinery supplier announced plans for temporary layoffs to save costs
Telenor shares fall as much as 10%, the most since 2020, after the telecom reduced Ebitda growth targets for its core Nordic markets and on the group level. The move comes less than three months since the guidance was first issued
Sweco shares drop as much as 8.8%, hitting their lowest level since May 2024, after the architecture and engineering consultancy reported sales and earnings that fell short of consensus expectations
Wartsila falls as much as 6.2%, the most since March 3, after the Finnish marine and energy industrial equipment maker reported its latest earnings. Analysts say the report, while a beat, is not necessarily reassuring

Earlier, Asian stocks traded lower but continued to hold near a February peak as traders awaited earnings from key companies in the global technology sector. The MSCI Asia Pacific Index fluctuated before falling as much as 0.4%, dragged by information technology firms. Financials were among the biggest boosts. Key gauges declined in Hong Kong, Australia and India while South Korean equities gained. The Topix gauge closed higher after Bank of Japan held interest rates as expected. Among the region’s tech firms that rely on outlays from the global hyperscalers, Advantest saw its stock slide Tuesday on a weak outlook and an indication of capacity constraints. Its fellow Japanese chip-equipment maker Tokyo Electron is among Asian firms reporting later this week, along with Chinese EV maker BYD.

Of the 150 S&P 500 companies to have reported so far this earnings season, 80% have beaten analysts’ forecasts, while 13% have missed. Earnings revisions for 2026, measured by Citigroup’s Earnings Revisions Index, have been improving since the start of the month. Companies have been holding or lifting guidance even as executives repeatedly flag an uncertain macroeconomic backdrop, according to JPMorgan strategists.

In FX, the Bloomberg Dollar Spot Index is up by 0.2% and reversing an earlier decline against the yen sparked by the Bank of Japan holding rates in a split decision.

In rates, bond markets are under pressure as oil prices rise, with Brent topping $111 to increase inflationary concerns. Treasury front-end yields are higher by 2bp-3bp, underperforming long end as Fed-dated swaps price in less easing; 10-year is 2bp higher near 4.36%, just off session high reached during London morning, outperforming German and UK counterparts by about 1bp-2bp. European bonds jolted by a jump in ECB CPI inflation expectations in March, though the initial drop on that has eased. German two-year yields up five basis points as traders increase ECB rate-hike bets and a similar move for two-year gilts, but declines have pared at the long-end in Europe and the UK. US session includes 7-year note auction at 1pm, the week’s third and final coupon auction following small tails for Monday’s 2- and 5-year note sales.

BlackRock Investment Institute said the war and elevated inflation will keep government bond yields higher for longer. But companies don’t seem to be feeling the hit yet. The fallout from the conflict, which broke out two-thirds of the way through the quarter, “has barely been visible,” says Bloomberg Opinion columnist John Authers, while current earnings forecasts look “very, very stretched.”

In commodities, June WTI crude futures are up almost 5%, rising above $101 and at session highs as blockades of the Strait of Hormuz curtail supply. Gold prices sinking, down by around $75 and testing $4,600/oz.

US economic data calendar slate includes weekly ADP employment change (8:15am), February FHFA house price index, S&P CS home prices (9am), April Richmond Fed manufacturing index and Conference Board consumer confidence (10am) and Dallas Fed services activity (10:30am)

Market Snapshot

S&P 500 mini -0.7%
Nasdaq 100 mini -1.2%
Russell 2000 mini -0.6%
Stoxx Europe 600 -0.5%
10-year Treasury yield +3 basis points at 4.37%
VIX +0.2 points at 18.26
Bloomberg Dollar Index +0.2% at 1198.04
euro -0.2% at $1.1697
WTI crude +4.8% at $101 barrel

Top Overnight News

President Donald Trump signaled he was unlikely to accept Iran’s latest proposal to end the conflict after Tehran proposed a plan that would reopen the Strait of Hormuz while leaving questions about its nuclear program for later negotiations. CNN
OpenAI recently missed its own targets for new users and revenue, stumbles that have raised concern among some company leaders about whether it will be able to support its massive spending on data centers. WSJ
China’s top leadership on Tuesday pledged to take more “forceful” measures to strengthen energy security and shore up business confidence, as the country faces economic headwinds from the protracted US – Iran standoff in the ME. Nikkei
The BoJ kept interest rates steady on Tuesday but three of its nine-member board proposed hiking borrowing costs, signaling policymakers' concerns over inflationary pressures from the Middle East conflict. The central bank also sharply revised up its price forecasts and ‌stressed vigilance to the risk of an inflation overshoot, signaling a strong chance of a rate hike in coming months. RTRS
Investors are reverting to a pre-war playbook of betting Asian stocks will outpace US peers due to the region’s central role in the AI boom. The MSCI Asia Pacific Index’s 14% surge so far this month has outpaced the S&P 500’s 9.9% gain. BBG
ECB survey reveals a spike in inflation expectations as consumers react to fallout from the Iran war. Additionally, the survey revealed a larger than expected tightening of credit standards due to higher perceived risks and lower risk tolerance. ECB
Keir Starmer faces a high-stakes vote today on whether to begin an investigation into his assurances to Parliament that due process was followed in Peter Mandelson’s appointment as US ambassador. BBG
Wall Street dealers’ Treasury holdings have jumped to the highest level since the global financial crisis as the Trump administration’s cut to regulation nudges banks back into the $31tn debt market. FT
Foreign-based automakers have warned the Trump administration that they are looking at pulling their cheapest car models out of the U.S. market if the U.S.-Mexico-Canada Agreement isn’t renewed or is watered down, according to people familiar with the discussions. WSJ
Thus far in 2026, there have been 25 IPOs greater than $25 million in value, totaling $14 billion in gross proceeds. This represents a nearly 80% increase in both the number and value of IPOs relative to this time last year. Roughly 40% of this year's IPOs have been Industrials companies compared with the historical annual average of 10% since 1995. In contrast, there have been no IPOs YTD in the Information Technology sector despite the sector representing 25% of IPOs since 1995: GS

Iran News

US President Trump has told advisers he is not satisfied with Iran’s latest proposal to reopen the Strait of Hormuz and end the war, NYT reported; a US official said that accepting it [the Iran proposal] could appear to deny Trump a victory. The proposal also called on the United States to end its naval blockade, but would have set aside questions about what to do with Iran’s nuclear program. A US official also said that accepting it [the Iran proposal] could appear to deny Trump a victory. US officials say Iran’s leadership has not authorised its negotiators to make concessions on the nuclear deal, frustrating any attempts to forge a compromise or peace agreement. At the heart of the debate over whether to accept the Iranian proposal were discussions in the Trump administration about the issue of economic leverage and what further American military operations would be needed to get Tehran to make significant concessions in negotiations. Some administration officials believe that continuing the blockade for two more months would cause significant long-term damage to Tehran’s energy industry. "Without a resumption of military action, there is little reason to think the Iranian position will shift.".
US President Trump is reportedly sceptical of Iran’s Strait of Hormuz proposal, WSJ reported citing sources; said White House will continue to negotiate with Iran; White House expected to provide its response and counterproposals in the coming days. President Trump and his national security team are sceptical of Iran’s offer to open the Strait of Hormuz in exchange for tabling discussions on its nuclear work, according to US officials. Trump discussed the offer with aides on Monday morning, expressing doubts about Iran’s good faith and its willingness to meet his key demand of ending nuclear enrichment and committing never to develop a nuclear weapon. The US plans to continue negotiations with Iran, with the White House expected to provide its response and counterproposals in the coming days. White House spokeswoman stated that the US will not negotiate through the press and that anything not announced by President Trump or the White House should be considered speculation.
US and Iran are not as far apart as they seem, and that the first part of any potential agreement will focus on opening the Strait of Hormuz without restrictions or fees, CNN reported, citing sources. The US and Iran may not have met for a second round of talks in Pakistan, but the two sides are not as far apart as they seem, according to sources familiar with the mediation process. Intense diplomacy continues behind the scenes, the sources say, and ongoing talks are centred around a staged process in which the first part of a potential deal would focus on returning to the status quo before the war and reopening the Strait of Hormuz without restrictions or tolls. The issue of Iran’s nuclear program – which both the US and Israel cited as their casus belli – would be addressed later. US President Donald Trump has previously said that any deal would require Iran to forfeit its supply of near bomb-grade uranium and give up enrichment, demands Iran has steadfastly refused to accept. According to the sources, mediators are applying pressure on both sides to reach an agreement, with the next few days being especially crucial. Hanging over it all is the chance that the US may decide to disengage and return to war.
Israeli PM Netanyahu reportedly told US President Trump the Israel-Lebanon ceasefire is fragile, N12 reported citing sources. Netanyahu told Trump that he believes that the strategy he has chosen is correct for now, but that it can only succeed if there is no compromise with the Iranians regarding the Strait of Hormuz. Israel and the US see eye to eye on the Iranian issue. n discussions in Israel, the Iranian difficulty in pumping oil from the wells is raised, which puts them in great distress.
"Netanyahu informed his ministers that there is no more he can do in Lebanon and this is what Washington wants", Al Jazeera reported citing an Israeli Radio source.
Pakistan Defence Minister said "our earnest efforts to end the conflict, impacting the entire region and beyond, are ongoing, and we remain hopeful of achieving a positive outcome", reported Anas Mallick.
Iran’s Deputy Defence Minister Talaei-Nik said Tehran is ready to share its defensive weapons capabilities with members of Shanghai Cooperation Organisation.
"Kuwaiti News Agency: The Gulf Cooperation Council holds an extraordinary summit in Jeddah", Sky News Arabia reported.
"Iran’s Foreign Minister is NOT returning to Pakistan following his Russia visit", journalist Mallick reported; "team is currently in consultation mode and will return when there to Islamabad, soon, when they think there is headway in talks.".
reported of Israeli airstrikes in the south of Lebanon, Al Jazeera reported.
US President Trump is unlikely to accept Iran's plan, according to CNN citing sources; reopening the strait without resolving the nuclear issues could remove a key piece of US leverage.
"Guided-missile destroyer USS Rafael Peralta (DDG 115) enforces the U.S. blockade of Iranian ports against M/T Stream after it attempted to sail to an Iranian port, April 26", US CENTCOM said.
US President Trump is unhappy with the Iranian proposal, according to a US official.
Taiwanese Defense Ministry said that Taiwan has spotted two Chinese warships operating in waters near the Penghu Islands and has sent its own naval and air forces to keep watch.
US Secretary of State Rubio said the ceasefire in Iran is unique because Israel is at war with Hezbollah, not Lebanon.
US Secretary of State Rubio said the Iran offer is better than we thought. Indications that Iranian Supreme Leader Khamenei is alive. Direct communications with Iran are very rare and discreet. Level of sanctions and pressure on Iran is extraordinary. Hopes the rest of the world will sanction Iran.

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks traded broadly weaker, as risk sentiment weakened amid reports that US President Trump is unlikely to agree to Iran’s proposal. ASX 200 started the session on the backfoot, and held onto its earlier losses. Sectors were broadly in the red, as Utilities underperformed while Energy was supported by higher crude prices. Nikkei 225 opened flat but fell lower, a move which was later exacerbated after the hawkish hold by the BoJ. The Bank upgraded inflation outlook and downgraded growth, with FY27 growth only modestly cut. The index fell back towards the 60,000 handle. For single stock stories, DENSO reported earning in which all metrics rose annually, but the Co. cut its FY net and op. profit guidance while stating its withdrawal of the proposal of Rohn acquisition. KOSPI was the outperformer, with LG Electronics among those that lifted the index after reports that the Co.’s CEO is to meet Nvidia CEO Huang’s daughter to discuss strategic cooperation. Hang Seng and Shanghai Comp. followed the broadly negative bias. CATL’s HK shares were under pressure after the Co.’s announcement of a plan to raise over HKD 39bln in private share placement to step up expansion in its renewables business.

Top Asian News

China State owned refiners have begun applying for government permits that would allow them to resume fuel exports in May, Bloomberg reported.

European bourses (STOXX 600 U/C) spent most of the European morning a touch lower after several geopolitical updates spurred energy benchmarks higher on the day. On the geopolitical front this morning, journalist Mallick said Iran’s Foreign Minister was not returning to Pakistan following his Russia visit - a post which soured the risk tone. European sectors opened mixed, and continue this way. Energy tops the pile amid BP's (+3.3%) stellar Q1 results, while Healthcare sits at the bottom amid losses in the sector's second-largest constituent Novartis (-2.6%), alongside Bayer (-2.7%). The former reported disappointing earnings, whilst the latter is hit on reports that the US Supreme Court is split over Bayer's fight against Roundup lawsuits.

Top European News

ECB Consumer Expectations Survey: 1yr CPI expectations 4% (exp. 2.8%, prev. 2.5%), 3yr CPI expectations 3.0% (exp. 2.6%, prev. 2.5%).

Trade/Tariffs

Indonesia's Economy Minister said they are going to cut the import duty for naphtha to 0%.

FX shows a risk-off bias with all G10 currencies lower against the Buck.
DXY is back above its 100 & 200 DMAs around 98.50, after falling below those levels on Monday. The buck saw weakness after the BoJ announcement, where the vote split was more hawkish than expected at 6-3. However, following the meeting, the USD moved higher in tandem with crude benchmarks after news that Iran’s Foreign Minister was not returning to Pakistan following his visit to Russia.
In addition to this, Ueda at the BoJ presser failed to support bets for a June hike, with the initial move seen on the 6-3 vote split paring to bring USD/JPY to above 159.50, to pre-announcement levels (ventured as low as 158.96). MUFG said the BoJ meeting was unlikely to trigger a sustained reversal of the bearish JPY trend that has been in place since the Middle East conflict started in late February
Elsewhere, NOK fares the best against the USD amid firmer oil prices. NOK/SEK, +0.4%, continues to edge towards the 1.00 mark not seen since November 2024, with a session high of 99.63.
GBP is one of the worst performers in the G10FX space, with UK Political developments in the spotlight ahead of a debate & vote on whether PM Starmer should be referred to the Privileges Committee (Full analysis on the headline feed at 09:05 BST) GBP/USD traders lower by 0.3% and breached the 1.35 mark, while EUR/GBP has been creeping higher throughout the session but remains flat on the day.
Japanese Finance Minister Katayama said volatility in crude is affecting FX, ready to take decisive action; will closely coordinate with the US and will act when necessary; standing by around the clock.

Fixed Income

Another bearish start for fixed income as energy climbs, and with some influence from a hawkish hold by the BoJ. (Details on geopols can be found in the commodities section below).
Most recently, the ECB SCE saw an increase in inflation expectations for the next 12 months, and for three years ahead, both saw a significant increase to 4.0% (prev. 2.5%) and 3.0% (prev. 2.5%), respectively. By way of comparison, the March baseline HICP peak was 2.6% in 2026, the adverse 3.5% for the same period, while the severe peaked at 4.8% in 2027. As such, 12-month expectations are hotter than all but the severe scenario, a point that adds a measure of hawkishness ahead of Thursday's ECB. Though this view is somewhat offset by the tightening of credit conditions and weaker loan demand evidenced in the BLS, a survey that was released alongside the CSE.
Amidst all this, Bunds down to a 124.87 base with a downside of nearly 50 ticks. The low was printed just after the ECB SCE release.
USTs down to a 110-26 base into a session that is likely to once again be dominated by geopolitics, earnings and looking ahead to the FOMC on Wednesday. We do get supply, 2yr FRN and a 7yr note offered, following a strong 2yr and mixed 5yr on Monday.
JGBs gapped lower on the resumption after the BoJ announcement, before then filling the move in short order. To recap, the BoJ was a hawkish-hold with three dissenters in favour of a hike, citing price concerns. Forecasts showed an increased inflation view, while the growth view was cut. Thereafter, Ueda was non-committal regarding the timing of the next hike, and seemingly attempted to temper expectations around June, commentary that had little JGBs impact but spurred notable JPY moves.
Gilts gapped lower by 21 ticks, acknowledging the above, and have since fallen another 29 to an 86.51 trough. If the move continues, we look to 86.00 before 85.91 from the last week of March. Gilts underperform marginally, awaiting the start of the debate and then vote on whether UK PM Starmer should be referred to the Privileges Committee or not; full primer available at 09:05BST.

Commodities

Crude prices are once again on a stronger footing this morning, with a number of sentiment-hitting headlines helping to lift demand for energy. In brief, CNN reported that President Trump is not satisfied with the Iranian proposal, adding that he is unlikely to accept it. But the piece did suggest that the US and Iran are not as far apart as they seem. Thereafter, Pakistani journalist Mallick reported that Iran’s Foreign Minister would not return to Pakistan following his visit to Russia, adding that he would only head back to the region if his team thinks there is “headway in talks”. This helped to spur some strength in both WTI and Brent, by around a USD 1/bbl.
As it stands, WTI holds at the upper end of a USD 96.24-99.66/bbl range, whilst Brent sits at the upper end of a USD 107.81-111.86/bbl range.
Sticking with geopols, but over in Europe, Ukraine said that it had struck Russia’s Tuapse oil refinery. It is considered amongst the top 10 largest in the country, with a capacity of 240k BPD. Elsewhere, on the supply front, Bloomberg reported that Saudi Arabia may cut its June OSP to Asia, citing easing demand.
Spot gold is lower this morning, by around a percent, and currently resides towards the lower end of a USD 4,614-4,701/oz range. Ultimately, spot gold has been pressured throughout the Iranian conflict, given the inflationary implications – a theme which appears to have played out today; the mild strength in USD this morning is also a factor.
Base metals also hold a negative bias – likely hampered by the downbeat risk tone seen during overnight trade. 3M LME Copper trades within a USD 13,105.98-13,264/t range.
Saudi Arabia reportedly may cut its official June crude selling prices to Asia as spot premiums eased and demand eased, Reuters reported.
Eneos (5020 JT) is reportedly the final bidder for some of the Asian assets of Chevron (CVX).
ADNOC has told some oil buyers to pick up Gulf supply outside the Strait of Hormuz, as producers look to diversify to other routes and bring their oil to the market, Bloomberg reported. ADNOC has told customers of the availability of cargoes for loading off Fujairah.
ADNOC is planning to invest tens of billions of dollars to build a natural gas business in the US to diversify its commodity exposure and the XRG business.
Ukrainian drones attack Russia's Tuapse oil refinery, causing a fire, according to authorities.
China allows the purchases of banned BHP (BHP AT) portside cargoes following a deal with the Co., according to sources.
Venezuela is to raise crude shipments to 1.06mln bpd and fuel sales to 134k by year-end, PDVSA vice president said.

Central Banks

BoJ Governor Ueda said there are possibilities of a rate hike if either upward risks to prices emerge or downside risks to the economy are limited. By June, probably no big upward pressure appears in consumer price data. It is possible to decide before confirming upward price pressure in price data. Communicating closely with government on monetary policy. When asked if a rate hike is not possible while the Strait of Hormuz is closed, the decision would depend on inflation risks and the economy beyond that. Not thinking there is a high likelihood of the current situation resembling the early 1970s. If the trend inflation overshoots by 2% by a big margin, then strong tightening could be required. In the process of adjusting rates towards neutral, all other conditions being equal. Japan's exposure to private credit is not big; it requires caution, given transparency in the sector is low. Unless significant downside pressure to the economy, a rate hike is possible. Rate hike decision and QT adjustment will be separate. Inflation upward risk could be a reason for raising rates, but not the only reason. Can not say how many months it would take to gauge timing of next rate hike, will look to see if underlying inflation has a clear upward risks. Need to be mindful of further economic slowdown depending on supply shock levels; Japan economy has some degree of endurance.
BoJ maintains its short-term interest rate at 0.75%, as expected; vote split 6-3 to hold (exp. near-unanimous); Nakagawa, Takata and Tamura voted to hike by 25bps to 1.0%.
BoJ Outlook Report: Real GDP: Fiscal 2026 median forecast 0.5% (prev. 1.0%). Fiscal 2027 median forecast 0.7% (prev. 0.8%). Fiscal 2028 median forecast 0.8%. Core CPI. Fiscal 2026 median forecast 2.8% (prev. 1.9%). Fiscal 2027 median forecast 2.3% (prev. 2.0%). Fiscal 2028 median forecast 2.0%. Dissenters (voted for 25bps hike).
BoJ’s Takata: price stability target had been more or less achieved and that risks to prices in Japan were already skewed to the upside due to the second-round effects of price rises stemming from overseas developments.
BoJ’s Tamura: Considering that, with risks to prices becoming significantly skewed to the upside, the bank should set the policy interest rate as close to the neutral rate as possible.
BoJ's Nakagawa: Risks to prices skewed to the upside under accommodative financial conditions. Monetary policy Will scrutinise timing, pace of policy adjustment with a close eye on economic and price impact from the Middle East developments.
Japanese Economy Minister Kiuchi will attend the BoJ policy meeting, hopes the BoJ communicates and coordinate policy closely with the government and work towards sustainably achieving a 2% inflation target.
ECB BLS: Banks tightened credit standards across all loan categories, driven by higher perceived risks and lower risk tolerance. Banks tightened credit standards across all loan categories, driven by higher perceived risks and lower risk tolerance. Banks expect to also tighten credit standards in the second quarter, influenced by geopolitical tensions, energy developments, and higher funding costs. Loan demand from firms and households expected to decrease, resulting from reduced financing for fixed investments, lower consumer confidence, and decreased spending on durables. Nearly half of euro area banks use securitisation to grant new loans, manage credit risk and enhance liquidity and funding, relying on non-bank financial entities to purchase securitised loans.
PBoC guided banks to increase lending in April, according to sources.

Geopolitics

Ukrainian drones attack Russia's Tuapse oil refinery, causing a fire, according to authorities.

US Event Calendar

9:00 am: United States Feb FHFA House Price Index MoM, est. 0.1%, prior 0.1%
10:00 am: United States Apr Richmond Fed Manufact. Index, est. 0.7, prior 0
10:00 am: United States Apr Conf. Board Consumer Confidence, est. 89, prior 91.8

DB's Jim Reid concludes the overnight wrap

Today marks 2 months since the strikes on Iran began and with that, we reach an uneasy lull in the newsflow. The Wall Street Journal have reported overnight that Trump and his officials are sceptical of Iran’s offer (that we mentioned yesterday) to reopen the Strait of Hormuz while leaving nuclear negotiations for later. The WSJ report suggested that the White House is likely to offer Tehran a counterproposal in the coming days. Earlier yesterday, White House Press Secretary Leavitt said that Trump had discussed Iran’s proposal with his national security officials on Monday morning and maintained “red lines” on any deal to end the war. With no sense of resolution and the Strait of Hormuz remaining essentially closed, this has brought Brent crude prices to their highest level in three weeks, inching +1.00% higher to $109.31/bbl overnight after a +2.75% rise yesterday.

Overnight, the Bank of Japan (BOJ) decided to maintain its policy rate at 0.75%, in a split vote of 6-3, marking the largest division under Kazuo Ueda’s leadership. The BoJ have unsurprisingly increased their inflation forecast and cut growth and on balance the statement leans slightly hawkish albeit with the press conference still to come. The yen has appreciated by +0.28%, gaining strength shortly after the announcement, with 2yr JGB yields climbing a couple of basis points at the same time.

Following the BOJ’s announcement, the Nikkei (-1.01%) is retreating from its record high. In other parts of Asia, markets are mixed. The Hang Seng index is falling by -0.67% and the S&P/ASX down -0.55%. Mainland Chinese markets are broadly flat. However, the KOSPI keeps on going and is up +1.01% as I type. US equity futures are fairly flat.

Ahead of the Asia session, markets had been mostly subdued given the lack of peace talks between the US and Iran, though US equities again outperformed, with the S&P 500 (+0.12%) eking out a new record high. Indeed, with the Strait of Hormuz still blocked and the conflict now two months in as of today, it’s clear that investors are pricing in some probability of an extended stagflationary shock. There wasn’t much news to drive that, but in many respects that was precisely the problem, because markets have been latching on to any signs of peace talks, and the absence of that is raising fears they’re not going to happen. We did have the Axios report late on Sunday night US time (mentioned yesterday) suggesting that Iran had offered the US a new proposal to reopen the Strait of Hormuz. As a result, oil prices probably didn't rise as much as they would have done to start the week without this news. But with no immediate progress, oil prices still moved higher through the day and by the close, Brent crude (+2.75%) was back up to $108.23/bbl, which is its highest closing level since the two-week ceasefire was announced in early April. Moreover, that increase was clear across the oil futures curve, with 6-month Brent futures (+1.79%) up to $88.01/bbl. So it’s clear that market expectations for lower oil prices ahead are also fading.

Given Brent has been back above $100/bbl for nearly a week now, it was clear that wider inflation concerns were rising back up the agenda. In fact, yesterday saw the 1yr US inflation swap (+7.1bps) hit 3.45%, its highest level since August. So that’s led to growing doubt about whether the Fed can cut rates this year, with the probability of a rate cut by December down from 46% on Friday (boosted by the DoJ/Fed news late in the session) to just 35% by the close. And in turn, that meant US Treasuries sold off across the curve, with the 2yr yield (+1.9bps) up to 3.80%, whilst the 10yr yield (+3.9bps) rose to 4.34%.

Yesterday marked another day of US equities shaking off more sombre global market sentiment, with the S&P 500 (+0.12%) and the NASDAQ (+0.20%) reaching new record highs. The Mag-7 (+0.64%) outperformed ahead of the results from Alphabet, Microsoft, Amazon and Meta tomorrow. But it was Nvidia (+4.00%) that led the Mag-7 gains, reaching a new record market capitalization of $5.26trn. Its market cap has risen by $1.25trn over the past four weeks. Despite that Nvidia advance, the Philly semiconductor index (-1.00%) fell after a record run of 18 consecutive gains, during which the index had risen +47.2%.

The market mood had been more cautious in Europe, as the STOXX 600 (-0.30%) fell for the 5th time in the last 6 sessions, taking the index to its lowest since the two-week ceasefire announcement. The FTSE 100 (-0.56%) led the European decline.

For European bonds it was a similar story as well, with UK gilts once again leading the underperformance. So 10yr gilt yields (+6.1bps) were up to 4.97%, and the 30yr yield (+7.7bps) hit a 7-month high of 5.66%. In part, that was driven by headlines that UK MPs were set to vote on whether PM Keir Starmer should be referred to the Privileges Committee, about whether he misled MPs on the vetting process to appoint Peter Mandelson as US Ambassador. That committee is the group of MPs that investigated former PM Boris Johnson over the partygate scandal, and although Labour have a majority in the House of Commons to prevent an inquiry, it leaves them in a tricky political spot and keeps the topic in the headlines. Moreover, there’s more happening at the Foreign Affairs Committee of MPs today, as Starmer’s former chief of staff Morgan McSweeney is set to appear at 11am London time on the Mandelson appointment.

Elsewhere in Europe, Bloomberg reported that the German finance ministry was preparing options to deal with the economic impact of the Iran war, including another suspension of the debt brake. However, as our economists write in their latest note on Germany’s reforms (link here), which kick off tomorrow, they think that for the debt brake to be suspended, the German economy would need to enter recessionary territory, which isn’t the case for now. Meanwhile, German bunds outperformed yesterday, consistent with the broader risk-off tone in markets. So the 10yr bund yield was “only” up +3.9bps to 3.03%, whereas those on 10yr OATs (+4.9bps) and BTPs (+5.2bps) both saw a larger increase.

Looking at the day ahead, US data releases include the Conference Board’s consumer confidence for April, and the FHFA’s house price index for February. From central banks, we’ll get the ECB’s Consumer Expectations Survey for March. Finally, earnings releases include Visa, Coca-Cola and Starbucks.

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