Key Highlights

• U.S. indefinitely extends its ceasefire with Iran.
• Bank Indonesia holds rates at 4.25%, as expected.
• BoE’s financial stability chair warns bank is on guard for a “private credit crunch.”

Chart of the Day

Core European equity sectors continue to underperform

^{Source: BNY}

Despite shifting U.S.-Iran headlines, markets are largely looking through escalation risk, with scope for an recovery in equities holdings if energy prices stabilize – even with global stock indices having already rebounded. However, the supply shock is leaving lasting scars, with equity flows showing a highly uneven sector recovery: European autos and luxury remain under pressure, while defense is relatively resilient.

Luxury continues to lag due to weaker demand from the Gulf states, with holdings well below historical norms. Meanwhile, autos face rising import costs and structural pressure from Chinese competition, particularly if EV demand accelerates. Aerospace and defense shares have held up best, staying above long-term averages, but upside is limited by tight fiscal conditions as governments prioritize energy support over defense spending.

What's Changed?

The conflict with Iran continues to dominate across markets, poking a hole in hopes that other issues beyond energy and geopolitics can drive flows. Private credit, earnings and central bank policy are all overshadowed by the fog of war. The U.S. unilateral ceasefire extension helped keep volatility in check, but headline watching for escalations continues. Stocks are mixed globally, as are bonds, while USD is holding steady. NOK leads gains while INR and IDR are lagging, with the threat of intervention not sufficient to turn their fortunes around.

Strait of Hormuz: Four vessels passed through the strait yesterday, and four more today. The recognition that over 1 billion barrels of oil haven’t been shipped is driving oil prices higher, along with the ongoing effective closure of the waterway. The U.S. blockade remains in place, although there are some reports of ships going dark and running through. Iran attacked two container ships after the U.S. ceasefire extension, adding to concerns that this is not just about oil, as food commodity prices rise. The ongoing global supply chain worries leave all commodities at the forefront of investors’ worries.

Earnings and M&A: Ongoing earnings reports that are beating expectations are supporting inflows, but unevenly. M&A continues apace and is adding support despite the late-stage growth implications. There are nagging warnings about prices, with United Airlines cutting its 2026 profit forecasts due to fuel costs. Deutsche Telekom is considering M&A with its American arm T-Mobile. ASM International’s record chip orders stand out. U.S. markets will  get earnings announcements from Texas Instruments, Boeing and other industrial companies today, with Tesla to follow after the close. Ahead of its IPO, SpaceX is acquiring AI coding company Cursor for $60bn. Futures in the U.S. are set to open higher.

Tech, cyber and value: Fears about cyberattacks rose yesterday on reports that a small group of unauthorized users had accessed the Anthropic Mythos models. Government agencies in the U.S., the U.K. and the EU are pushing for early testing to safeguard their systems. The earnings focus on tech will remain a key story for investors. Talk of a supercycle in chips is rising, with the surge in the Philly Semiconductor Index a case in point. Trading in chipmakers is uneven by value, with AMD, Nvidia and TSMC priced at four times the P/E of Samsung, Micron and SK Hynix.

Bottom line: Investors continue to  be able to look through the fog of the current conflict and slew of headlines. Yesterday’s U.S. retail sales comforted growth watchers, given that U.S. consumer buying (ex-gasoline) still was strong; however, tax returns and the ongoing energy costs issues will test this again in the April data. The lack of anything significant on the news agenda today other than Q1 earnings reports leaves the risk that we remain fixed on Iran headlines. This is an uncomfortable place, despite the modest upticks in risk prices, as the sustainability of any rally is overwhelmed by the expectations of more volatility. Risk is winning out over reward, leaving oil and its correlations to all other markets as the key barometer. 

What You Need to Know

President Trump has indefinitely extended the ceasefire with Iran, which was initially set to expire today, to allow continued peace talks mediated by Pakistan. The extension was unilateral, with no immediate confirmation from Iran or Israel. Trump has maintained the U.S. Navy’s blockade of Iranian ports, which Iran deems an act of war. Iranian officials have dismissed the extension as a U.S. tactic. The ceasefire began two weeks prior ago, after the ongoing conflict had started on February 28. Pakistani Prime Minister Shehbaz Sharif has welcomed the extension, hoping that a comprehensive peace deal will be reached in future talks in Islamabad. Brent +1.016% to 99.48, WTI +0.837% to 90.42, Omani crude +6.368% to 99.4, Dubai crude +1.202% to 102.875, HH natural gas +0.816% to 2.719, Dutch TTF natural gas +2.133% to 42.825.

Ukraine’s readiness to resume oil flows through the Druzhba pipeline is a key step toward unlocking a €90bn EU loan, after repairs to infrastructure damaged in a Russian attack were completed, according to UkrTransNafta and Hungary’s MOL. The restart addresses a major sticking point with Hungary, which had blocked the financing amid disputes over delays in restoring shipments. Outgoing Prime Minister Viktor Orbán had linked his opposition to the timing of the repairs, while the government now signals it will support the aid if flows resume. The funding remains critical for Ukraine’s fiscal position as external support has weakened, with Hungary’s incoming leadership also engaging Russia on future energy arrangements. PFTS 0% to 460, USDUAH -0.066% to 43.9212,10y UGB +1.5bp to 13.621%.

BoE Deputy Governor Sarah Breeden has warned that the central bank is preparing for the risk of a private credit crunch, highlighting growing financial stability concerns as the sector expands rapidly. Speaking at a Financial Times conference, she noted that while private credit supports the economy, it also introduces vulnerabilities, particularly around liquidity mismatches and rising leverage across corporate borrowers, funds and sponsors. Breeden emphasized that these risks are difficult to fully quantify and could strain credit provision even if they do not threaten the core banking system. The bank is therefore conducting stress tests focused on private markets to assess resilience and potential spillovers, reflecting heightened vigilance as non-bank lending becomes an increasingly important source of financing. FTSE 100 +0.02% to 10501, GBPUSD +0.104% to 1.3522, 10y gilt +0.5bp to 4.889%.

ECB Chief Economist Philip Lane has critiqued the structural shortage of euro-denominated safe assets, arguing that the limited supply, currently anchored by German Bunds, is constraining the euro area’s financial system and global role. He highlighted that while institutional reforms have strengthened euro area resilience and reduced sovereign spread volatility, the existing pool of national bonds does not sufficiently provide safe asset characteristics. Lane outlined several solutions, including expanding EU common bond issuance, increasing joint borrowing for shared priorities such as public investment and Ukraine funding, and revisiting proposals such as blue bonds or sovereign bond-backed securities. He stressed that scaling up common debt would enhance market liquidity and financial stability but ultimately depends on political will and maintaining fiscal discipline across member states. Euro Stoxx 50 -0.06% to 5927, EURUSD +0.043% to 1.1749, BBG AGG Euro Government High Grade EUR +2.7bp to 3.229%.

Bank Indonesia has kept its policy rate unchanged at 4.75%, maintaining a neutral stance while reaffirming its commitment to going “all out” on FX and government bond market interventions. The key takeaway was the downward revision to the current account balance, now seen at -1.3% to -0.5% of GDP (midpoint -0.9%), versus -0.9% to -0.1% (midpoint -0.5%) previously. Other macro forecasts were unchanged: 2026 GDP at 4.9-5.7%, CPI at 1.5-3.5%, and loan growth at 8-12%. On the policy front, the Finance Ministry’s liquidity injections are gaining traction, with average lending rates easing to around 14% from 14.8% in January. Improving credit transmission remains a key priority for Bank Indonesia. JCI -0.16% to 7548, USDIDR +0.181% to 17175, 10y IDGB +1.1bp to 6.606%.

What We're Watching

Türkiye’s central bank makes its rate decision: one-week repo rate is expected to remain at 37.00%.

Central bank speakers: The ECB’s Philip Lane speaks in Frankfurt; the ECB’s Olaf Sleijpen speaks in Amsterdam; the ECB’s Joachim Nagel speaks in Brussels; ECB President Christine Lagarde speaks in a panel on global challenges.

U.S. Treasury sells 17-week bills and $13bn in a 20y bond reopening.

What iFlow is Showing Us

Mood: Sentiment is continuing to improve, driven by stronger equity buying and reduced selling in core sovereign bonds. iFlow Mood is at 0.256.

FX: In the G10, USD and DKK saw outflows, while inflows elsewhere were led by NZD. EMEA and LatAm flows were mixed: PLN outflows contrasted with demand in ZAR and CLP. APAC FX recorded moderate two-way flows, with outflows in IDR, SGD and THB.

FI: Strong demand for Eurozone and Turkish government bonds, offset by substantial selling in Chile, Australia, the Philippines and Indonesia. Cross-border flows show continued selling in U.S. Treasurys at the short end (1y to 3y)

Equities: Broad-based inflows persisted across regions, with notable demand in China, Norway, Chile, Sweden, Peru, Australia, Türkiye and Hungary. Within EM, inflows were concentrated in the industrials, healthcare, financials and IT sectors.

Quotes of the Day

“A comfort zone is a beautiful place – but nothing ever grows there.” – John Assaraf

“The only time you are actually growing is when you are uncomfortable.” – T. Harv Eker

Economic Details

Dutch consumer confidence dropped sharply in April to -44 from -30 in March, in the second-largest decline since records began in 1986 and the largest since May 2020. The economic climate perception worsened significantly, falling from -54 to -72, with negativity about both past and future economic conditions. Willingness to buy also slid to -26 from -15, the second-largest drop on record after April 2020. Owner-occupied home prices rose by 5.0% y/y in March vs 5.4% in February. Housing transactions increased by nearly 13% y/y, with 19,381 homes sold in March. The average transaction price was €494,605. After a decline that lasted through to June 2023, house prices have been rising again, reaching 15.9% above their previous July 2022 peak. The price index for existing homes stood at 154 (2020=100) in March. In Q1 2026, 55,949 homes changed hands, up nearly 9% y/y. AEX +0.55% to 1025, EURUSD +0.043% to 1.1749, 10y NGB +0.8bp to 3.145%

Dutch fixed asset investment was unchanged y/y in February, following a 0.9% fall in January. The stagnation reflected mixed dynamics across sectors, with increased investment in machinery, including defense equipment, and infrastructure, offset by declines in passenger cars and buildings. The data are not adjusted for calendar effects, though the number of working days was unchanged from a year earlier. Looking ahead, CBS metrics show investment conditions deteriorating in April relative to February. This weakening was driven primarily by a slower y/y rise in goods exports and weaker consumer confidence, signaling a less supportive environment for near-term capital expenditure growth.

U.K. inflation accelerated modestly in March, with CPIH climbing to 3.4% y/y from 3.2% in February, while CPI increased to 3.3% from 3.0%. On a m/m basis, CPIH rose by 0.6% and CPI by 0.7%, both stronger than the 0.3% increases recorded in March 2025. The pick-up in headline inflation was driven primarily by motor fuels, which made the largest upward contribution, while clothing exerted a partial offset. Core measures showed slight easing, with core CPIH edging down to 3.3% and core CPI to 3.1%. However, underlying composition was mixed, as goods inflation accelerated while services inflation remained elevated, indicating persistent domestic price pressures despite some moderation in core trends. FTSE 100 +0.02% to 10501, GBPUSD +0.104% to 1.3522, 10y gilt +0.5bp to 4.889%.

U.K. rents rose by 3.4% y/y in March to an average of £1,377, easing from 3.6% in February and indicating a modest slowdown in rental inflation. Growth remained uneven across regions, with rents increasing by 3.4% in England, 4.8% in Wales and 2.1% in Scotland, while Northern Ireland recorded a 5.0% rise in the year to January 2026. Within England, rental inflation was highest in the North East at 6.5% and lowest in London at 1.7%. Meanwhile, house price growth picked up slightly, rising 1.2% y/y in February to £268,000, compared with 1.0% previously. This suggests a gradual firming in the housing market alongside moderating rental pressures.

U.K. producer prices accelerated sharply in March, with input prices rising 5.4% y/y from 0.7% in February and output prices increasing to 2.6% from 1.8%. On a m/m basis, input prices surged 4.4% while factory gate prices rose 0.9%, reversing a decline in the previous month. The increase was driven primarily by energy components, particularly a sharp rise in crude oil input costs and higher prices for refined petroleum products. Import prices also picked up, rising 4.2% y/y from 0.6% previously. Meanwhile, services producer prices edged up to 3.0% y/y in Q1 2026, pointing to broadening upstream inflation pressures.

Swedish labor market data for March showed employment at 5,230,000 and unemployment rising to 565,000. This corresponds to a 9.7% rate, up 1.2 percentage points y/y. The labor force reached 5,795,000, with participation at 75.9%, including a sizable increase among women. Temporary employment rose, driven by a 62,000 rise among women to 376,000, contributing to a total of 648,000 temporary workers. Total hours worked averaged 172.3 million per week. Despite the unadjusted rise in unemployment, seasonally adjusted figures indicated improving conditions, with employment and participation increasing and unemployment easing to 8.7%. However, the data carry uncertainty due to survey response issues, potentially understating employment and overstating unemployment, particularly among young full-time students. OMX +0.18% to 3139, EURSEK -0.217% to 10.7726, 10y Swedish GB +3.3bp to 2.876%.

South African inflation edged up to 3.1% y/y in March from 3.0% in February, while prices increased by 0.6% m/m. The modest acceleration in headline inflation was driven primarily by housing and utilities, which contributed 1.2 percentage points, alongside food and non-alcoholic beverages, and insurance and financial services. Underlying dynamics were mixed, with goods inflation easing slightly to 1.8% while services inflation strengthened to 4.2%, pointing to firmer domestic price pressures. On a m/m basis, gains were supported by the housing, transport and services components. Overall, inflation remains relatively contained but shows gradual upward momentum, led by services. JSE TOP 40 -0.18% to 110392, USDZAR -0.047% to 16.4825, 10y SAGB +6.6bp to 8.665%.

Türkiye’s consumer confidence index rose to 85.5 in April from 85.0 in March, in a 0.5% m/m increase. The improvement was driven by stronger expectations in some forward-looking components, despite mixed underlying dynamics. Expectations for household financial conditions over the next 12 months increased to 87.5, while intentions to spend on durable goods also rose to 104.4. However, assessments of the current household financial situation declined to 71.8 and expectations for the general economic outlook weakened to 78.3. Overall, the index remains below the neutral 100-point threshold, indicating continued pessimism among consumers, though the modest rise suggests a slight improvement in sentiment heading into the second quarter. BI 100 +0.33% to 14422, USDTRY +0.07% to 44.9249, 10y TGB +21bp to 32.51%.

Japan’s trade statistics for March 2026 show exports at ¥11.03tn, up 11.7% y/y (February 2025: 4.0%), marking seven consecutive months of growth. Imports rose 10.9% y/y to ¥10.34tn (February 2025: 10.3% y/y). The trade surplus for March came in at ¥667bn, up 25.9% y/y, in the biggest increase since December 2020. Key export drivers included semiconductors and electronic components, non-ferrous metals and communication devices. Imports increased mainly in communication equipment and non-ferrous metals. There were y/y rises in exports to the U.S. (+3.4%), the EU (+18.2%) and Asia (+15.9%), with a 17.7% y/y jump in exports bound for China. Nikkei +0.4% to 59586, USDJPY -0.007% to 159.36, 10y JGB +0.7bp to 2.404%

Japan’s service industry sales grew by 4.1% y/y in February to reach ¥35.58tn. Key sectors included information and communications (+5.7%), transport and postal activities (+6.1%) and accommodations, eating and drinking services (+7.1%). Employment in the service industry increased by 0.7% y/y to 30.08 million people, with substantial gains in information and communications (+2.6%) and education and learning support (+2.6%). Some sectors, such as living-related and personal services and amusement services, saw slight decreases in employment (-0.1%). Overall, the service sector recorded moderate growth in sales and employment in February.

South Korea’s Producer Price Index (PPI) rose by 1.6% m/m and 4.1% y/y in March (up from 0.6% m/m and 2.5% y/y in February) on higher petroleum and chemical product prices. Manufacturing product prices climbed 3.5% m/m, while agricultural, forestry and marine products fell 3.3% m/m. The Domestic Supply Price Index rose 2.3% m/m and 3.7% y/y, driven by raw materials (+5.1% m/m) and intermediate goods (+2.8% m/m). The Total Output Price Index surged 4.7% m/m and 9.0% y/y, led by manufacturing products (+7.9% m/m). These preliminary figures indicate rising producer costs, especially in manufacturing and energy-related sectors. KOSPI +0.46% to 6418, USDKRW -0.071% to 1479.45, 10y KTB -2.9bp to 3.656%.

Australia’s Westpac-Melbourne Institute Leading Index six-month annualized growth rate fell to -0.13% in March 2026 from +0.05% in February, marking the first below-trend reading since August 2025. The decline from +0.31% in October 2025 reflects weakening economic momentum, driven by rising interest rates and the global energy shock linked to the Middle East conflict. The index signals below-trend growth for the remainder of 2026, indicating a slowdown in economic activity relative to trend three to nine months ahead. iFlow indicates a recent surge in interest in AUDUSD amid the recovery in risk appetite, underscoring a positive combination of a hawkish RBA along with a positive terms-of-trade shock for Australia due to the conflict. ASX +0.03% to 5635, AUDUSD +0.154% to 0.7163, 10y ACGB +5bp to 4.957%.