"Semi-Irrational Chase" Sends Futures To Another Record High, Oil Drops On Iran Optimism

The global market meltup is rolling on. US stock futures inch higher, but are off session highs, with oil falling for a third straight day as traders waited for updates on a potential US-Iran peace deal that would reopen oil flows through the Strait of Hormuz. As of 8:00am ET, S&P and Nasdaq futures were 0.1% higher, after the benchmarks notched back-to-back record highs. In premarket trading, most Mag 7 stocks were higher although Arm Holdings dropped 8% after the chip company reported weak fourth-quarter royalty revenue, hurt by sluggishness in the smartphone industry; the company warned about weaker demand for lower-end phones due to higher memory cost. Whirlpool plunged 18% after the household appliance manufacturer cut its revenue forecast for the full year, missing the average analyst estimate. Overseas indexes are also rising, bolstered by stocks tied to artificial intelligence. Japan’s Nikkei 225 was a particular standout, climbing 5.6% after an 18% rally in Softbank shares. Brent traded near $99 a barrel, extending a 12% slump in the two prior sessions on mounting confidence that an agreement in the Middle East is within reach. The dollar headed for its worst week in a month. Global bonds continued their advance as inflationary pressures receded. Today's US economic data calendar slate includes 1Q preliminary nonfarm productivity and jobless claims (8:30am), March construction spending (10am), April New York Fed 1-year inflation expectations (11am) and March consumer credit (3pm). Fed speaker slate includes Hammack (10am, 2:05pm), Daly (12:30pm), Kashkari (1pm) and Williams (3:30pm)

In premarket trading, Mag 7 stocks are mostly higher (Tesla +1.7%, Alphabet +1.1%, Nvidia +0.1%, Microsoft +0.7%, Amazon +0.3, Meta Platforms +0.02%, Apple -0.1%).

Albemarle (ALB) climbs 6% after the chemical producer reported net sales for the first quarter that beat the average analyst estimate.
Arm Holdings ADRs (ARM) drop 8% after the chip company reported weak fourth-quarter royalty revenue, hurt by sluggishness in the smartphone industry. Daiwa’s analyst notes that there was weaker demand for lower-end phones due to higher memory cost.
Celsius Holdings (CELH) rises 4% after the energy drink maker’s first quarter adjusted Ebitda and revenue beat consensus estimate.
Coherent (COHR) drops 3% as analysts note that the optical communications company’s gross margins underwhelmed.
DoorDash (DASH) jumps 10% after the delivery firm gave a forecast for order value in the current period that topped analyst estimates, signaling healthy consumer demand for its services in the US and international markets.
Fluence Energy (FLNC) jumps 31% after the company reported a narrower-than-estimated second-quarter adjusted Ebitda loss. Additionally, Fluence maintained its 2026 total revenue forecast, which has a midpoint above the average analyst estimate.
Fortinet (FTNT) gains 15% after the cybersecurity company forecast earnings that beat the average analyst estimate. The company also boosted its full-year revenue outlook. Analysts note particular strength at its hardware business.
Fastly (FSLY) slumps 25% after the software company reported first-quarter earnings, a report that wasn’t strong enough to extend a rally that has lifted shares nearly 300% off a February low.
McDonald’s (MCD) gains 3% after the fast-food chain said bigger orders bolstered results in the US in the first quarter.
Sezzle (SEZL) climbs 15% after the financial technology company raised its total revenue growth forecast for the full year.
Shake Shack (SHAK) falls 18% after the burger chain reported revenue for the first quarter that missed the average analyst estimate.
Warby Parker (WRBY) gains 7% after the the eyeglass company reported net revenue for the first quarter that beat the average analyst estimate.
Whirlpool (WHR) is down 18% after the household appliance manufacturer cut its revenue forecast for the full year, missing the average analyst estimate.
Zoetis (ZTS) falls 10% after the animal health firm cut its adjusted earnings per share guidance for the full year.

Elsewhere in AI, Anthropic signed an agreement with Elon Musk’s SpaceX to access computing resources from a large SpaceX data center. Anthropic’s CEO said his company is “working as quickly as possible” to secure more computing resources after experiencing “80x growth” in annualized revenue and usage in 1Q.

An ongoing slide in oil prices is helping to lift investors’ mood, with Brent crude futures trading below $100 a barrel this morning. The U.S. and Iran are getting closer to restarting talks to end the war and reopen the Strait of Hormuz, with discussions possibly resuming as early as next week in Islamabad. While the US is waiting on Iran to respond to its proposal which sent stocks surging yesterday, and it’s unclear whether they’ll accept. But stocks have largely focused on a solid earnings season and the tech trade anyway. The inverse relationship between stocks and oil prices is “long gone,” wrote Bloomberg Opinion columnist John Authers. The resumption of shipments through Hormuz would also reduce risks around the economic impact of the war. US Treasury yields are retreating for a third straight session alongside the dollar, which is now trading lower than when the war began.

“Even though there is not yet a final peace agreement, markets are clearly pricing in a meaningful step forward toward a resolution,” said Francisco Simón, head of investment strategy at Santander Asset Management. “The key point is that this reduces the probability of the most negative scenarios, particularly those involving a more prolonged shock to global growth.”

That said, there are clear signs of mania: the SOX chip index is now up more than 60% this year - a parabolic move that suggests “we are in semi-irrational chase mode,” Goldman Delta-One head Richard Privorotsky warns. Meanwhile, in a sign the entire market has become one giant gamma squeeze, the S&P traded a record $2.6 trillion notional of calls yesterday..

... with almost 60% of every SPX option yesterday traded a call.

There are a few signs of the rally broadening out, with the S&P 500 equal-weight index closing at a record for the first time since late February. But there’s really just one trade in town, with the SOX hitting new records almost daily. “Until supply normalizes, the market can continue to justify increasingly large numbers across the ecosystem, although the obvious risks are building,” Goldman partner Privorotsky wrote in a note.

The global chip euphoria helped South Korea’s stock market to overtake Canada’s, and is boosting niche firms around the world, with Sweden’s Silex Microsystems having the strongest first day of trading for a sizable European IPO in almost five years. Still, there may be a limit — after more than doubling in value this year, ARM shares fell after it warned of sluggishness in the smartphone industry.

In eco data, planned job cuts continued to mount in the tech sector last month, even as overall private-sector layoff announcements receded, according to Challenger data. And consumer sentiment remains closely watched. Costco’s April comparable sales rose 11.6%, aided by 3.2% gas-price inflation. Whirlpool cut its revenue forecast, noting North American industry demand reached recession-level lows.

The Trump administration has begun paying out refunds for the $166 billion in global tariffs that the US Supreme Court declared unlawful earlier this year. The FCC said that an inquiry the commission launched into the rising cost of watching sports on TV may not lead to any regulatory action. In hedge funds, SPX Capital is undergoing a major restructuring, with senior partners departing and a rethink of operations that will include shutting its London office. Point72 is creating a new fundamental stock-picking unit led by Hong Kong-based star portfolio manager James Lau.

With earnings season gradually drawing to a close, of the 411 S&P 500 companies to have reported so far this earnings season, 84% have beaten analysts’ forecasts, while 11% have missed

In Europe, the Stoxx 600 is down 0.2% after erasing an earlier gain.Uutilities and food beverage shares led declines while luxury, travel and leisure stocks are among the best performers. Here are the biggest movers Thursday:

Luxury stocks are among Europe’s best performers on Thursday, with strong Chinese consumer data adding to hopes for a turnaround that’s already been fueled by optimism about a peace deal in the Iran war
Stora Enso gains as much as 5.4%, the most in a month, following a first-quarter Ebit beat from the paper, packaging and forestry company
Tenaris falls as much as 7.1%, the most since July last year, after the Italian pipeline and steel-pipe manufacturer reported its latest earnings
Maersk falls as much as 5.3%, the most since March, after the Danish shipping giant reported its latest earnings and reaffirmed its full-year guidance, with the latter being a small negative for analysts as consensus already sits at the upper end of the guided range
Orsted shares drop 2.4% after the Danish wind farm operator reported 1Q Ebitda that beat the average analyst estimate, while after-tax profit missed. Analysts at Jefferies and JP Morgan point to rising interest rates and higher-than-expected taxes for the miss
Siemens Healthineers drops as much as 5.7%, the most in six months, after the German medical equipment maker cut its comparable sales forecast for the full year and lowered the upper end of the guidance range for adjusted EPS
GN Store Nord shares fall as much as 8.7%, the most in three months, after the Danish communication solutions company reported what Jefferies described as a “weakish” quarter
Vestas shares see choppy trading as the Danish wind-turbine maker reported first-quarter EBIT before special items that beat the average analyst estimate, though Morgan Stanley flagged weakness in services

Earlier, Asian stocks rose to a record high, supported by a catchup rally in Japanese shares and optimism that the US and Iran are nearing a deal to end their war. The MSCI Asia Pacific Index climbed as much as 2.3% after gaining 2.4% in the previous session. TSMC, SoftBank Group and SK Hynix provided the biggest boost to the advance. Japan led gains in the region as trading resumed after a long holiday. Shares in Taiwan and Hong Kong also outperformed. Tech shares continued to draw investor interest, with the MSCI Asia Pacific Information Technology Index gaining as much as 3.4% to a record.

In FX, the Bloomberg Dollar Spot Index falls 0.1%. The Norwegian krone outperforms, rising 0.9% against the greenback after the Norges Bank hiked interest rates. Most economists had them on hold. The Riksbank did stand pat.

In rates, treasuries hold small gains into early US session, supported by lower oil prices and European bond rally. Brent crude oil holds below $100 a barrel, extending Wednesday’s nearly 8% slump, as investors weigh latest attempts by US and Iran to reach a peace agreement. US yields are 2bp-3bp richer on the day with curve spreads narrowly mixed; 10-year, lower by 2bp near 4.33%, slightly outperforms German and UK counterparts. European government bonds also edge up. Gilts are also in focus with UK local elections underway. US session includes weekly jobless claims and several Fed speakers. IG dollar issuance slate includes a couple of deals. Three names priced $14.5 billion Wednesday, led by Eli Lilly’s $9b eight-part offering. On average, issuers paid negative concessions on deals that were 3.7 times oversubscribed.

In commodities, brent crude futures fall another 2% to around $99 a barrel as the US waits on Iran to respond to its proposal to reopen the Strait of Hormuz and end the war. Precious metals gain with spot silver up 4%. Bitcoin falls.

Today's US economic data calendar slate includes 1Q preliminary nonfarm productivity and jobless claims (8:30am), March construction spending (10am), April New York Fed 1-year inflation expectations (11am) and March consumer credit (3pm). Fed speaker slate includes Hammack (10am, 2:05pm), Daly (12:30pm), Kashkari (1pm) and Williams (3:30pm)

Market snapshot

S&P 500 mini +0.1%
Nasdaq 100 mini +0.1%
Russell 2000 mini +0.1%
Stoxx Europe 600 -0.2%,
DAX little changed,
CAC 40 little changed
10-year Treasury yield -2 basis points at 4.33%
VIX +0.1 points at 17.48
Bloomberg Dollar Index -0.1% at 1187.37,
euro +0.2% at $1.1768
WTI crude -2.6% at $92.6/barrel

Top Overnight News

The U.S.-Iran war had created a “new wake-up call” for global trade, Maersk CEO Vincent Clerc told CNBC on Thursday, warning that the impact could worsen in the coming months. “And there is so much we can do on reducing costs, but there is a lot we need to do on passing on these costs to customers, because it’s such a massive cost increase that we can’t shoulder it.” CNBC
Privately, President Trump’s advisers are increasingly worried that Republicans will pay a political price for the rising fuel costs, according to people familiar with the matter. Many of those advisers are eager to end the war in hopes that prices will begin moderating before November’s midterm elections. WSJ
Hungry to sell, UAE slips hidden oil tankers through Strait of Hormuz: RTRS
The jet fuel shock triggered by the Iran war has been a bigger crisis for the global airline industry than the Covid-19 pandemic, according to one of Asia’s biggest carriers AirAsia. FT
Japan probably spent around $30 billion since its currency intervention on April 30, according to a Bloomberg analysis. Their top FX official Atsushi Mimura signaled authorities are prepared to respond on all fronts to speculative moves. BBG
Chinese households increased their pace of spending over the recent Labor Day extended holiday weekend, with a 14.3% jump in consumer sales from the same holiday last year. The increase is seen as an encouraging sign for the world's second-largest economy, but household spending over holidays can be volatile, and big-ticket purchases remain subdued. BBG
China asked its biggest banks to pause new yuan loans to five US-sanctioned refiners tied to Iranian oil, people familiar said. BBG
The US and China are considering launching official discussions on AI when US President Trump visits China next week. With the proposed recurring conversations, risks from unexpected AI model behaviour, autonomous military systems, and attacks by non-state actors using open source tools will be addressed: WSJ
Norway’s central bank unexpectedly hiked rates (from 4% to 4.25% - the Street was expecting rates to stay unchanged) due to upward inflation pressures. BBG
BOE officials are privately concerned UK economic data may be sending false signals, complicating rate-setting, people familiar said. BBG
Federal Reserve officials said on Wednesday the ongoing U.S.-backed war with Iran is raising the risk of a sustained inflation shock, with continued high oil prices and developing concerns about problems with global supply chains. BBG

Iran News

Al Arabiya reported that "the coming hours will witness a breakthrough for the situation of the ships stuck in the strait", spurring pressure in the crude complex.
Iran is expected to provide its reply to the US proposal for ending the war to mediators on Thursday, according to CNN, citing a regional source.
US President Trump could turn to military action without an agreement with Iran ahead of the China trip, according to Axios, citing US officials.
Iran is expected to provide its reply to mediators on Thursday, CNN reported citing a regional source.
"Arabic sources: Reaching understandings regarding easing the siege in exchange for the gradual opening of the Strait of Hormuz ", Al Arabiya reported; "The coming hours will witness a breakthrough for the situation of the ships stuck in the strait".
Pakistani Foreign Ministry spokesperson said, "We do not talk about war and instead talk about dialogue and diplomacy. However, if any aggression similar to what we saw last year, we will respond; Pakistan will respond just as it did", Mallick posted.
Pakistani Foreign Ministry Spokesperson said "We have not yet received a response from Iran regarding the US amendments", Al Jazeera reported.
"Pakistani source to Al Arabiya said Iran may hand over its response to the US proposal to the Pakistani mediator today", Al Arabiya. "No arrangements for any direct meetings between the Iranians and the Americans so far.". "Contacts with the Iranians are ongoing and there are no obstacles hindering continued". "Discussions are ongoing regarding the status of the Strait of Hormuz, and reaching understandings is still possible".
Pakistani Foreign Ministry said "We expect an urgent agreement between Iran and the United States", Al Araby reported.
"Israel was informed that Iran has agreed to transfer its stockpile of 60% enriched uranium to a third country that remains unknown", Sky News Arabia reported citing Israeli Channel 12.
Pakistani Foreign Ministry spokesperson, on US-Iran agreement, said "we would expect an agreement sooner rather than later", Pakistani journalist Mallick posted. "We will welcome any settlement wherever that takes place, if it takes place in Islamabad, it would be an honour and privilege.”.
The proposed agreement between the US and Iran may limit the IDF's action in Lebanon, Israeli press reported citing an Israeli official.
US President Trump, on Iran, said it will all work out very quickly.
IDF said it has intercepted suspicious aerial target launched from Lebanon towards Israel following sirens that sounded in Manara, Margaliot and Kiryat Shmona.
Lebanon's PM Salam said it is not seeking normalisation with Israel and it is too early to discuss any possible meeting with Israeli PM Netanyahu.
Iran has issued a message to commercial vessels in the Strait of Hormuz, saying Iran's port is fully prepared to provide general maritime services and support to the vessels, IRNA reported.
US President Trump could turn to military action without an Iran agreement ahead of the China trip, Axios reported citing US officials.
US President Trump's reversal on his plan to help ships go through the Strait of Hormuz came after Saudi Arabia suspended the US's ability to use its bases and airspace to carry out Project Freedom, NBC reported citing US officials.
IRGC Navy Political Affairs Official said we will impose our control over the Strait of Hormuz, and any attack will be met with a plan beyond the enemy's calculations, Al Jazeera reported.

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks traded broadly in the green, as a continuation of gains seen stateside as hopes of an end of the US-Iran conflict spurred risk-on flows. ASX 200 continued its rebound and is set for 2 consecutive days of gains. Miners were the biggest gainers while Energy names slumped. Shares of Tabcorp have nose-dived after the Co. stated that AUSTRAC has commenced an enforcement investigation with serious concerns over money laundering and terrorism financing risks. Nikkei 225 returned from its holiday with the need to catch up to the gains seen in equities while it was closed. As a result, the Nikkei surged to new ATHs and extended above the 63,000 handle, driven by tech majors SoftBank and Ibiden. KOSPI underperformed its APAC peers, as it consolidated following its surge beyond the 7,000 handle. SK Securities raised its PT for Samsung Electronics and SK Hynix to a price that is 88% and 87% higher, respectively, than their current price, reaffirming the tech strength. Shanghai Comp. and Hang Seng gained despite a lack of single-stock news. Continuing on the chip theme, Montage has overtaken CATL as the most expensive dual-listed stock in Hong Kong relative to its mainland shares

Top Asian News

Philippine's Economic Minister said controlling inflation, even if it will cost growth, is not necessarily bad.
China's top diplomat Wang Yi met with a delegation led by Steve Daines on Thursday, Xinhua reported.
South Korea's government is to invest KRW 30bln in a project aimed at establishing an AI data platform for autonomous vessels, Yonhap reported.
Indonesia's Planning Minister said the 2027 government working plan is set with GDP growth target in a range of 5.9-7.5%.
Hong Kong Financial Secretary Chan announces plans to promote the use of the CNY in commodity pricing.
China rural banks have reportedly cut its deposit rates, with further cuts expected.
Japan's Top FX Diplomat Mimura does not comment on FX intervention but said FX is being closely watched and are in daily contact with US authorities. IMF's classification of free floating regime does not restrict frequency of intervention. Will not comment on FX levels. Too early to comment on US Treasury Secretary Bessent's upcoming visit.
US Treasury Bessent is to meet with Japanese PM Takaichi, Finance Minister Katayama and BoJ Governor Ueda for 3 days, starting Monday 11th, to discuss the weak yen, Nikkei reported.

European bourses are broadly modestly firmer, attempting to build on the hefty gains seen in the prior session. Geopolitics remains the key focus this morning, with Iran expected to provide its reply to the US proposal for ending the war to mediators on Thursday, CNN reported. Sentiment in early morning trade was lifted after Al Arabiya reported that "the coming hours will witness a breakthrough for the situation of the ships stuck in the strait". European sectors are mixed. Travel & Leisure takes the top spot, joined closely by Consumer Products and then Autos. Sectors which have broadly benefited from the risk-tone and/or lower energy prices. Elsewhere, Utilities is found right at the foot of the pile, joined closely by Telecoms. In terms of key movers: Henkel (+3.9%, sales topped exp.), Rheinmetall (-3.1%, missed on Q1 EPS, but reaffirmed outlook), Telecom Italia (+3.2%, revenue +1.4% amidst strong Brazil growth), Shell (-1.7%, EPS and Rev. topped expectations whilst announcing a USD 3bln buyback), Flutter (-3.6%, cut guidance despite reporting higher Q1 revenue).

Top European News

A Cyprian official said EU countries and lawmakers have reached a provisional deal to delay the implementation of watered-down AI rules.
Palliser Capital has reportedly begun building a stake in FTSE-100 firm Autotrader Group (AUTO LN) and pushing for it to set out plans to return up to GBP 700mln to shareholders alongside full-year results this month, Sky News reported.
Maersk (MAERSKB DC) CEO said if the Middle East situation becomes more peaceful, will then assess whether Red Sea transit can resume.
Maersk (MAERSKB DC) Q1 2026 (USD): Revenue 12.97bln (prev. 13.32bln Y/Y), EBITDA 1.75bln (prev. 2.71bln Y/Y), PBT 292mln (prev. 1.43bln Y/Y); maintains FY outlook. The Middle East conflict had limited impact on the quarter's realised financial results.
Shell (SHEL LN) Q1 2026 (USD): EPS 1.22 (exp. 1.06), Adj. EBITDA 17.7bln (exp. 15.1bln); announces a USD 3bln share buyback and a 5% quarterly dividend increase. Other Metrics. Adj. Earnings 6.915bln (prev. 3.256bln Y/Y),. CFFO 6.062bln (prev. 9.438bln Y/Y). Cash capex 4.202bln (prev. 6.015bln Y/Y). Free cash flow 2.9bln (prev. 4.2bln Y/Y). Net debt 52.6bln (prev. 45.7bln Y/Y). Gearing 23%, dividend +5% to 0.3906. Capex guide USD 24-26bln FY. Comments. Q2 2026 outlook reflects lower expected volumes and a weaker margin environment. Q2 2026 production outlook reflects higher planned maintenance across the portfolio. Q2 2026 production and liquefaction outlook reflects the impact of Middle East conflict including Qatar and higher planned maintenance across the portfolio.
EU Transport Commissioner said airlines must continue to reimburse passengers for flight cancellations caused by high energy prices, the FT reported.

DXY is on a softer footing amid renewed downside in crude prices following headlines in Arabian press that a breakthrough may be reached between the US and Iran in the coming hours regarding the Strait of Hormuz. Further, Israeli press suggested Iran has agreed to transfer its 60% HEU to a third unknown country. That being said, it’s worth noting that none of the reports thus far have come from Iranian outlets. DXY resides in a 97.856-98.058 range, still within yesterday’s 97.625-98.342 parameter.
G10 price action has largely been dictated by the Iranian war optimism. EUR/USD is back over 1.1750 in a 1.1741-1.1775 range and still within yesterday’s parameter.
GBP/USD rose back above the 1.3600 mark but remains within Wednesday’s parameter, although traders also eye UK local elections. A full preview can be found on the headline feed, but in brief, a worse-than-expected outcome for the Labour Party could see renewed pressure on PM Starmer.
USD/JPY is softer but only marginally, and within a narrow 156.02-156.53 range. Japanese participants returned overnight from Golden Week. Japan’s Chief FX Diplomat Mimura made comments earlier in the APAC session but refused to comment on FX intervention, and reiterated that FX is being closely watched. USD/JPY did see some fleeting pressure as Mimura spoke. Further on the FX front, US Treasury Secretary Bessent is to meet with Japanese PM Takaichi, Finance Minister Katayama and BoJ Governor Ueda for 3 days, starting Monday 11th, to discuss the weak yen.
Antipodeans are firmer amid their high-beta properties coupled with upside across base and precious metals, albeit both the AUD/USD and NZD/USD pairs reside within the upper end of yesterday’s range.

Central Banks

Fed's Goolsbee (2027 voter) said he is open to new ways of thinking about inflation. Overhauling the Fed's inflation framework is 'not an easy space'. Kevin Warsh has some fresh ideas worth thinking about. Fed should incorporate all the data it can, but he doesn't think there is a silver bullet for the inflation problem. He would be on the lookout for 'underheating' demand if low consumer confidence translates into falling consumer spending. US might be approaching an era of labour scarcity due to a combination of population aging and limited immigration.
BoJ data up to April 30th shows Japan spent around JPY 4.68tln to support the JPY.
BoJ Minutes from the March 18th-19th meeting stated that many members shared the view that it was appropriate to maintain the policy rate at 0.75%.
ECB's Villeroy said they must be data dependent.
ECB's Nagel said likely to raise interest rates unless the outlook improves markedly.
ECB's Kocher said ECB is to consider hikes in the next months if there is no improvement; ECB is in data-dependent meeting-by-meeting mode.
BoE officials are privately concerned that UK economic data may be sending false signals that complicate the job of setting interest rates, according to Bloomberg citing sources.
RBNZ Governor Breman said higher near term inflation and weaker growth is somewhat expected, still expect growth this year.
PBoC injected CNY 27bln via 7-day reverse repos with the rate maintained at 1.40%.
PBoC set USD/CNY mid-point at 6.8487 vs exp. 6.8087 (prev. 6.8562).
BoC Governor Macklem said inflation forecasts in the July monetary policy report will not change much after including the government fiscal update.
BoC Governor Macklem said if oil prices keep rising and stay elevated "there may be a need for consecutive increases in the policy rate". If the United States imposes significant new trade restrictions on Canada, we may need to cut the policy rate further to support economic growth. Alternatively, if oil prices continue to increase, and particularly if they remain elevated, the risk that higher energy prices become ongoing generalized inflation increases. If this starts to happen, there may be a need for consecutive increases in the policy rate.
Norges Bank hikes rates by 25bps to 4.25% (prev. 4.00%); "The Committee judges that a higher policy rate is needed to return inflation to target within a reasonable time horizon".
Riksbank maintains its Policy Rate at 1.75% as expected, "there is scope to wait until there is a clearer picture", "current level of the policy rate gives a good initial position to adjust monetary policy if required to safeguard the inflation target".

Fixed Income

A modestly firmer session for fixed benchmarks, driven higher by a pullback in energy this morning on a handful of constructive geopolitical updates ahead of the expected Iranian response, via Pakistan, to the US proposal.
Updates that lifted the benchmarks from near-enough unchanged this morning to gains of a handful of ticks in USTs, but pertinently to a new WTD high of 111-01+. Bunds were similarly bid at the time, got to 126.12, also a new WTD peak, posting gains of 42 ticks at the time.
Since, the benchmarks have pulled back modestly from the above peaks but remain in the green by a few ticks into an afternoon that is likely to be dominated once again by geopolitical updates, but the docket is also packed with data and Fed speak.
For Gilts, they gapped higher by 31 ticks to a 87.70 session high, driven by the above geopolitical move being in full swing at the time. Gilts have also waned from best and currently hold onto gains of c. 10 ticks. Voting in the UK's local elections is now underway, polls close at 22:00BST. Thereafter, a drip feed of results will occur throughout the night and well into Friday, the results of which could spark the formal start of a leadership challenge against PM Starmer, in the days and weeks ahead.
Saudi Arabia's PIF is offering three-, seven- & 30yr USD benchmarks bonds, Bloomberg reported citing sources; IPTs are USTs +130-170bps.
Australia sold AUD 150mln 0.25% 2032 I/L bonds: b/c 3.97x, average yield 2.172%.

Commodities

Renewed downside was seen in crude prices following headlines in Arab press that a breakthrough may be reached between US and Iran in the coming hours regarding the Strait of Hormuz. Further, Israeli press suggested Iran has agreed to transfer its 60% HEU to a third unknown country. That being said, it’s worth noting that none of the reports thus far have come from Iranian outlets.
Regarding the state of talks, US President Trump is optimistic about a framework, and Iran is expected to respond to the US proposal via mediators on Thursday. Axios reported Trump could still turn to military action without an agreement before his China trip. Iran is expected to provide its reply to the US proposal for ending the war to mediators on Thursday, CNN reported, citing a regional source. WSJ editorial said, from its discussions with senior officials, current US red lines in the talks include Iran confirming it does not seek nuclear weapons; the dismantlement of Fordow, Natanz and Isfahan; a ban on underground nuclear work; and on-demand inspections with penalties for violations.
WTI and Brent futures have been trading off the hopes of oil flowing through the Strait once again. Brent July resides towards the bottom end of a USD 97.44-102.55/bbl range; WTI June sits towards the bottom of a 91.92-96.48/bbl range at the time of writing. Dutch TTF this morning dropped to EUR 42/MWh on the report from near EUR 45/MWH before stabilising around EUR 43.50/MWh.
Spot gold topped Wednesday’s USD 4,723/oz high to reach a current peak of USD 4,753.43/oz, amid the aforementioned pullback in energy. Spot gold sees its 100 DMA at USD 4,774.67/oz.
Base metals are mostly firmer as the pullback in crude prices bodes well for risk sentiment and broader global economic growth. That being said, 3M LME copper is flat within a USD 13,331.58-13,448.83/t range as it takes a breather from yesterday’s gains.
Chinese Gold Reserves at 74.64mln troy oz at end-April (prev. 74.38mln in March); extends gold buying streak to 18 months.
German government has rejected a return to nuclear power.
A drone crashed into an oil storage facility in a Latvian town close to the Russian border, according to LSM.
LME's CEO said it is ready to expand its suite of approved warehouses in Hong Kong.
Australia set domestic gas reservation scheme at 20%.
HKEX CEO said the LME warehouses approved in Hong Kong are close to full capacity.
China has reportedly asked banks to pause new loans to US-sanctioned refiners, Bloomberg reported citing sources.
The Trump administration is studying using oil under land at US military bases and other DoW sites to help refill the emergency reserves, Bloomberg reported citing sources.
North Korea said it will not join the nuclear non-proliferation treaty, according to KCNA.

Trade/Tariffs

A South Korean official said the country's first US investment under trade deal is to be announced after law takes effect in June.
European Parliament's Top Negotiator said that good progress has been made in the EU-US talks though issues remain unsolved and that we will continue advancing progress and ensure stronger protections for citizens and businesses.

Geopolitics

Romanian Defence Ministry said a drone briefly breached Romanian airspace during a Russian attack on Ukraine.
A drone crashed into an oil storage facility in a Latvian town close to the Russian border, according to LSM.
Ukrainian President Zelensky said Russia has ignored our ceasefire proposal.
Russian Foreign Ministry spokesperson said that Russia is ready to negotiate about Ukraine and emphasises that Moscow has never refused called and talks that have real results.
Russia has decided to use its veto against the US-Gulf draft resolution on Hormuz; Russia rejects the chapter VII wording of the draft resolution on Hormuz, via Al Hadath.

US Event Calendar

8:30 am: United States May 2 Initial Jobless Claims, est. 205k, prior 189k
8:30 am: United States Apr 25 Continuing Claims, est. 1799.7k, prior 1785k
10:00 am: United States Mar Construction Spending MoM, est. 0.2%
10:00 am: United States Fed’s Hammack Appears on WOSU Public Radio
11:00 am: United States NY Fed Releases Survey of Consumer Expectations
12:30 pm: United States Fed’s Daly on Bloomberg Television
1:00 pm: United States Fed’s Kashkari Participates in Fireside Chat
2:05 pm: United States Fed’s Hammack Speaks in Fireside Chat
3:30 pm: United States Fed’s Williams in Moderated Discussion

DB's Jim Reid concludes the overnight wrap

I wake up this morning to be told by my new WHOOP that after two weeks of sleep and activity data it can now reveal I'm only 43.2 years old in WHOOP years, nearly 9 years younger than my biological age. However just as I was about to crack open a bottle of morning champagne, alongside a bacon sandwich to celebrate, it told me that current data momentum suggests I'm ageing 1.6 times quicker than the average. So by the end of next week I could be in my 70s! Sounds like a recipe to be up all night tonight worried.

The time to be up all night and worried about the war in Iran might be past its peak after the news flow of the last 24 hours with no substantial push back to the optimistic Axios story that broke yesterday mid-morning London time. Oil is consolidating this morning after a big slump yesterday, which left Brent crude -7.83% lower on the day at $101.27/bbl. So that led to a huge bond rally as investors priced out the chance of rate hikes, with European front-end yields seeing double digit declines. Moreover, continued momentum from the AI trade helped propel risk assets to new highs as well, with the S&P 500 (+1.46%) at another record. So it was a strong session all round as stagflationary fears eased.

In Asia we're also largely higher, boosted by a surging Nikkei (+5.68%) which is catching up after three days of holiday. Elsewhere the CSI (+0.20%) and the Shanghai Composite (+0.25%) are trading slightly higher, while the Hang Seng (+1.56%) is performing significantly better due to gains in technology shares. In contrast, the KOSPI (+0.11%) is underperforming relative to its regional peers after reaching a series of highs driven by gains in chipmakers. It's up over +75% YTD. Elsewhere, S&P ASX 200 (+0.80%) is brushing off data that showed Australia logging an unexpected trade deficit in March. US and Europe equity futures are fairly flat, pausing for breath after yesterday's surges.
The main driver of the moves over the last 24 hours was that Axios report that the US and Iran were close to agreeing a one-page memo that would end the war and set a framework for more detailed nuclear negotiations. Its provision would reportedly include a moratorium on nuclear enrichment for Iran, whilst the US would lift its sanctions and release billions in frozen Iranian funds in return, as well as both sides lifting restrictions around the Strait of Hormuz. And whilst the report left plenty of questions, a more positive tone continued during the day with Trump saying he thought the war “had a very good chance of ending” by next week and telling Fox News that he was “cautiously optimistic” about the proposal. He didn't look to dispute the Axios report which was notable. Meanwhile, Iran’s ISNA said that Iran was looking at the US proposal, with Bloomberg reporting that Iran is expected to send a response via Pakistan in the next two days.

That backdrop triggered a steep fall in oil prices, with Brent crude down -7.28% to $101.87/bbl, while WTI fell -7.03% to $95.08/bbl. Indeed, Brent even fell beneath $97/bbl at one point, which was its lowest intra-day level in over two weeks, though it then rebounded a bit as Trump threatened to restart bombing unless Iran “agrees to give what has been agreed to”. Still, the overarching theme was one of rising optimism and oil markets priced easing risks of persistent disruption, as 6-month Brent futures (-6.02%) saw their biggest decline since March to $85.12/bbl.

With fears of a stagflationary shock easing again, multiple equity indices like the S&P 500 (+1.46%), Nasdaq (+2.02%) and the Mag 7 (+2.00%) roared to new highs. Within the rally, chipmakers continued to outperform, driven by strong earnings from AMD (+18.61%) after it reported strong demand for AI agents. So this powered the Philly semiconductor index up +4.48%, extending its YTD gain to 62%. The positive mood was also visible in other risk assets, with US HY credit spreads tightening by 4bp to their narrowest level in three months.
Bonds also saw strong gains, with 10yr Treasury yields falling -7.6bps to 4.35%, while 2yr yields fell -7.7bps to 3.87%. That rally came as investors priced out the chances of the Fed having to hike rates over the next year, with only 5bps of hikes now being priced by next March, down from 14bps the day before. While oil drove the rally in Treasuries, we also saw the latest quarterly refunding announcement confirm that the US Treasury expects to keep bond auction sizes unchanged "for at least the next several quarters". Elsewhere, anticipation of the conflict easing led the dollar (-0.43%) to fall to its lowest level since the strikes against Iran began, while gold (+2.95) had its best day since March.

Over in Europe, markets saw an even stronger rally, given the continent’s greater exposure to the energy shock. That included significant advances for the STOXX 600 (+2.22%), FTSE 100 (+2.15%), DAX (+2.12%) and the CAC 40 (+2.94%). Moreover, bonds extended their gains as investors dialled back the prospect of imminent rate hikes. Indeed, the chance of an ECB rate hike by the June meeting fell beneath 80% by the close, its lowest in a couple of weeks. So that helped bonds extend their gains, with yields on 10yr bunds (-6.2bps), OATs (-8.8bps) and BTPs (-11.6bps) all falling. The rally was even stronger at the front-end, with 2yr bund yields falling -10.7bps. The mood in Europe was also aided by slightly better news from the PMI data, with the final Euro Area composite PMI revised up to 48.8 (vs. flash 48.6).
Staying with Europe, a key event today will be the UK’s local elections, although we won’t start to get the results until tomorrow morning. This will be important for markets because the governing Labour Party are expected to do badly, which has raised speculation that there might be a challenge against PM Keir Starmer. And in turn, the expectation is that a new Labour leader would face pressure to ease the fiscal rules and hence raise gilt issuance. That uncertainty has weighed on gilts, and the 2yr yield had risen by 100bps since the end of February, though it fell -13.8bps yesterday given the oil decline.

Finally, there wasn’t much data in the US, but we did get the ADP’s latest report of private payrolls for April, which came in a bit shy of expectations at 109k (vs 120k expected) ahead of the more important payrolls print tomorrow. That said, there was still a notable acceleration relative to prior months, and it was the strongest monthly print since January 2025.

To the day ahead now, in addition to the UK local elections we’ll receive US Q1 nonfarm productivity, March construction spending and the NY Fed inflation expectations for April. Then in Europe, we’ll get the UK April construction PMI, Germany April Construction PMI, France March trade balance and Eurozone March retail sales. Central Bank events include the Riksbank decision and Norges Bank decision, whilst speakers include the Fed’s Hammack and Williams, along with the ECB’s Kocher, Villeroy, Guindos, Lane and Schnabel. Earnings include McDonald’s, Gilead and McKesson.

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