Daily update
Daily update
- The Wall Street Journal reports US President Trump is considering a retreat from the Gulf without establishing control of the Strait of Hormuz. Investors, temperamentally inclined to look on the bright side, are focusing on the retreat and not the fact that an Iranian Hormuz toll would act a bit like US tariffs.
- The US administration might ask Gulf countries to pay for the costs of the war. The fiscal burden on US taxpayers is likely to be notable. However, Gulf countries might be reluctant to finance a war they were not consulted about, when they have to reconstruct, rearm, and attempt to rebuild their non-oil economies. Whether Gulf countries continue to spend their post-war military budgets in the US, or whether they (like Europe) redirect their spending elsewhere matters economically.
- German March consumer price inflation showed the expected higher energy price effect. Japan’s March Tokyo inflation did not, with government subsidies containing price increases (these subsidies reduce next month). South Korea’s government proposed a second budget to subsidise oil—reducing the economic impact at a fiscal cost. Euro area consumer price inflation is due today.
- Bond traders are becoming reacquainted with reality after speeches by the Federal Reserve’s Powell and Williams signalled no desire to raise rates.