Investors Focus on Talks but Not on the Ongoing Closure of Hormuz

China is the only economy not to experience an inflation spike.

Key Takeaways

• Stock Rally Hits Pause: The two-day headline-driven U.S. equity market rally has pressed the pause button here in the early going (4:15 a.m. ET), with futures slightly in the red, but not before the S&P 500 managed to cross above all its major averages in this latest power move (now riding a seven-day winning streak; and the Dow is now in the green for the year!).

• Ceasefire on Shaky Ground: Markets simply like the fact that President Trump, to some extent, has begun to wave the proverbial white flag even though this ceasefire is proving to be very fragile at this point. From my lens, it can definitely be argued that Tehran, not needing to worry about its population or midterm elections, won this war in a strategic sense — see A Cease-Fire for Now in Iran, but a Blow to American Credibility on the front page of the New York Times and Iran Flexes Its Muscles On Economy on page A7 of today’s Wall Street Journal.

• China PPI Turns Positive: The overseas data were sparse, but there was one notable item, which is that China’s three-year experience with producer price deflation ended in March, with the PPI managing to rise +0.5% on a YoY basis, swinging from a -0.9% trajectory in February. Good news for manufacturers (and the Chinese profits cycle) but less so for retailers because the headline consumer inflation rate actually eased to +1.0% YoY from +1.3% (the MoM change was -0.4%).