Daily update
Daily update
- Markets are relatively calm in the wake of events in the Middle East. This may seem peculiar, but markets rarely price in extreme tail risks. Iran indicated it considers the matter concluded. US President Biden has urged restraint. Signs from the Israeli war cabinet suggest a response, but there is no idea of scale. The G7 has been as effective as the G7 ever is, talking about sanctions against Iran without agreeing on action.
- There are wider implications. US House Speaker Johnson has prevented movement on a bipartisan Senate bill to offer aid to Israel, Ukraine, and Taiwan. Current Middle Eastern events may change the view of former President Trump (causing Speaker Johnson to change his view), or might switch votes to support the measure. However, markets have priced in most of the risks associated with Ukraine.
- US March retail sales are due. While inflation perceptions are high in the US, inflation reality is more benign (especially for middle-income families), giving a spending fire power that has sustained consumption. The pivot from spending on goods to spending on fun is still taking place, which means retail sales should underperform overall consumption.
- Assorted central bank speakers are due—the ECB’s Lane and the Federal Reserve’s Williams are the focus.
