ON DECK FOR TUESDAY, APRIL 7th
KEY POINTS:
- Global markets don’t really believe Trump’s threats…
- …but Iran seems to
- US core durable goods orders are likely to remain strong on data centers and metals
- Small test markets show little inflation in early war readings
Tick, tick, tick, tick…..
That’s the sound of 12amET tonight approaching. Markets may be on tenterhooks until then to see if either side blinks before Trump’s threat to escalate by bombing civilian infrastructure in Iran possibly becomes reality.
The pattern is for Trump to repeatedly back down, but we’ll see. He also says it will be a four-hour window of decimation, but we’ll see on that as well.
This doubt is probably why markets are not really showing that much concern at this point. Oil prices are volatile but little changed. Equities were rallying in Europe as they caught up from a four-day weekend and to developments such as nonfarm payrolls, but have since lost most of the early morning gain while NA equity futures are a touch lower. The USD is little changed. Sovereign bond yields have a mild cheapening bias across major global benchmarks.
Iran, however, is showing all signs of fully expecting a bombardment with no appetite for negotiations. Iran ordered train service to be cancelled across multiple major cities this morning. Both sides kept attacking each other overnight.
Inflation Undershoots in Small Markets on War’s First Effects
At the same time, we have evidence of very soft inflation during March despite the war’s effects but from two small markets. Sweden’s krona is the worst currency performer among the majors and semi-majors this morning after CPI surprised lower than expected. CPI fell -0.6% m/m NSA (0% consensus) with underlying CPI matching. That dragged the yearly rate down to just 0.6% y/y which bolstered the case for the Riksbank to remain on hold, for now.
Thailand’s March CPI reading also fell shy of expectations at 0.6% m/m (0.9) consensus) with core CPI up 0.6% m/m like the prior month.
US Core Durable Goods Orders Likely Remained Strong
US durable goods orders for February (8:30amET) will probably be faded as backward looking in the current war context. Maybe they shouldn’t be. A significant headline drop is expected due to lower transportation orders but core orders excluding defence and transportation are expected to keep rising. Core orders have been accelerating over the past two years (chart 1) as orders for computers and electrical equipment continue to soar likely due to the AI and data center spending boom. Primary and fabricated metal orders are also strong and partially driven by higher prices due to tariffs.
The rest of the line-up is pretty dull. The US releases the weekly ADP private payrolls report (8:15amET) and Canada updates the little watched Ivey PMI for March (10amET) that mashes so many things together from the private and public sectors that you never can tell what’s driving it.
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This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
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Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.