Markets still want to believe

Daily update

Axios newswires reported the US and Iran “closing in on a deal”. Axios published similar reports on 15 April, 17 April, and 26 April. Markets want to believe, and blind faith drives pricing at the moment. The shape of the current war is largely in Iran’s hands. Investors have few insights into Iranian policy making.
US firms are starting to receive refunds of the illegal tariff payments (with interest). These refunds benefit companies, not US consumers (why cut prices, when new tariffs are already in place?). Owners of small businesses that receive a rebate may consider this a windfall to their personal incomes, supporting consumption.
German March factory orders data is due, but this will barely have had time to register the effects of the war. Assorted European Central Bank (ECB) speakers are scheduled, but in the absence of information on second-round inflation effects, their insights can only reflect pre-existing prejudice.
US 1Q productivity is derived from GDP and labor force numbers, both of which can be considered (to use a technical term) “dodgy data”. Federal Reserve Chair nominee Warsh wants productivity data to be strong, because that suggests efficiency, which might imply lower inflation and lower interest rates. Lower interest rates would please US President Trump. Optimism about the impact of AI on economic productivity should be treated with considerable caution.