Markets start the week lower as Strait of Hormuz deadline nears

Good morning

Welcome back after a lovely weekend.  I hope you enjoyed the same dry, sunny weather, OK at times it was not warm but we’re only just coming out of winter so that’s understandable, but just to see the blue sky gave a warm enough feeling.  Can’t say that watching Spurs gave me a warm feeling mind you.  I was pretty confident heading into the match, and Spurs had a reasonable start but having been unable to score from open play or indeed one of the numerous first-half corners, the old dread returned and indeed it was Forest who broke the deadlock and never really looked back. 

I don’t fully understand why the Spurs manager had changed the team and the formation from the midweek side that performed so well against Atletico Madrid.  Made little sense at the time and less sense now. The only upside is that West Ham lost and Leeds drew so the other teams closest to Spurs at the bottom of the table didn’t gain too much ground, but Spurs are now going to have to pull something very special out of the bag if we are going to stay up.

Arsenal had the chance to win the first of four possible trophies yesterday afternoon but it was Man City who came away with the spoils.  City haven’t been firing on all cylinders in recent matches but they took their chances at Wembley to win 2-0, Guardiola’s fifth League Cup in ten years.  Arsenal will be hoping this is not the start of a bad run of form that would jeopardise the other three possible trophies this season.  They are well placed in the League, they’d probably take that title if it meant foregoing the FA cup for sure, although I’m not sure what they’d choose between the domestic League title of the European Champions League.  They’re too strong to come away with nothing….aren’t they?

To the markets and equity prices have opened sharply lower this morning after threats and counter-threats between US and Iran. Trump gave Iran a 48 hour deadline to reopen the Strait of Hormuz, that deadline expires tonight but Iran show no signs of backing down, threatening to attack energy infrastructure in the region.  There is no end in sight in the conflict, I’m sure if you’d have asked Trump a couple of weeks ago he’d have expected Iran to have caved in by now.  If there is ultimately no regime change the best thing US can do is do its best to wipe out missile manufacturing and storage sites to dent Iran’s military might, but that’s a difficult task.

Asian equities were down some 3.5% overnight, European markets are down 1.5-2.0% as I type and I expect markets to remain under pressure, particularly as it looks very much like we are shortly going to face a very real energy crisis which will, in turn, impact the global economy.  Not what Trump was hoping for, I’m sure.  The US dollar is strong, GBPUSD is now 1.3300 and EURUSD sits just above 1.15.  AUD and NZD are having a tough time, now 1.9100 and 2.2950 against GBP.  USDJPY starts the week pretty close to recent highs, now 159.45, the days of Yen being a safe-haven purchase seem to be long-gone.

It’s a quiet economic calendar today, with just a few ECB speakers to keep us entertained.  Overnight we’ll have Aussie PMI’s, tomorrow brings the same from EU, UK and US.  UK inflation and retail sales data follows later in the week although no surprise that the Middle East conflict still dominates news and markets.

Have a great day…

-  15.00 EU consumer confidence

-  15.00 ECBs Cipollone speaks

-  16.00 ECBs Lane speaks

-  22.00 AUS S&P manufacturing, services PMIs

-  23.30 Japan CPI

-  01.00 RBNZs Breman speaks