Oil and the dollar rose on Tuesday while U.S. stocks slipped, a response by investors to mixed and inconclusive signals from Washington and Tehran about the status of peace talks. The market response unfolded a day before the set U.S.-Iran ceasefire deadline, a deadline President Donald Trump extended after markets had closed.
In a separate analysis published today, I examine why China's exchange rate may not be as chronically undervalued as many market observers assert. While China runs substantial external surpluses that contribute to widening global imbalances, much of that effect is offset by very large capital outflows on the financial account, according to the piece.
Readers are also invited to an upcoming LSEG webinar on April 23, where I will discuss safe-haven dynamics in uncertain markets alongside my ROI colleague Mike Dolan.
Recommended reading to contextualize today's moves:
- 1. Iran yet to decide on whether to attend talks as ceasefire deadline ticks down
- 2. Warsh says he made no rate-cut promises to Trump, plans 'robust' Fed reforms
- 3. Record surge in gasoline receipts boosts U.S. retail sales, but weakness is looming
- 4. Can Europe take advantage of its savings buffer over U.S.?: Mike Dolan
- 5. EXCLUSIVE-Meta to start capturing employee mouse movements, keystrokes for AI training data
Key market moves on the day
- Stocks: Asian equities were generally higher. The KOSPI staged a dramatic run - hitting a new high and rising about 26% in April, putting it on track for its best month since 1998. European markets were down roughly 1%. Wall Street's major indexes fell about 0.6%.
- Sectors and shares: All but one S&P 500 sector finished lower, with energy the lone gainer. Six sectors fell by 1% or more while energy rose 1.3%. Airlines underperformed, down 1.7% overall; American Airlines fell another 4% for a second straight day and United lost 3% in after-hours trade. Apple dropped 2.5%.
- Foreign exchange: The dollar strengthened. The euro was the weakest among G10 currencies, while the Chilean peso (CLP), South African rand (ZAR) and Hungarian forint (HUF) ranked among the largest decliners in emerging markets.
- Bonds: Japanese government bond yields eased while European yields climbed. U.S. yields rose by about 9 basis points at the short end, producing the largest curve flattening in two weeks.
- Commodities and metals: Oil gained about 3% while gold declined around 2%.
Major themes and talking points
Duel on the Hill: Kevin Warsh's confirmation hearing for Fed chair was contentious. He placed blame on the central bank for the post-pandemic inflation surge and fielded probing questions from senators about the extent of former President Trump's influence over monetary policy. Warsh declined to explicitly state that Trump lost the 2020 election. He urged what he termed "regime change" at the Federal Reserve - proposing a new "framework" for inflation control and a potential overhaul in how the Fed communicates with the public - though he emphasized that monetary policy independence remains "essential." If confirmed, Warsh indicated there could be significant changes to the Fed's approach.
Trump's intervention in corporate matters: The president again signalled strong opinions about private companies and deals. On Tuesday he voiced opposition to a potential merger between United and American Airlines and said he would "love somebody to buy" Spirit Airlines, which is in bankruptcy. His public comments have in recent months produced pronounced share-price reactions across affected companies.
Apple succession and AI questions: Late Monday the company announced that Tim Cook will step down in September to become executive chairman, with John Ternus set to take over as CEO. Apple shares fell 2.5% on Tuesday, marking the largest one-day drop in two months - the last comparable decline occurring just before the outbreak of the Iran war. Market attention has shifted to how Ternus will approach artificial intelligence. Analysts highlighted that Apple's press release did not mention AI, prompting questions about whether the company will embed AI capabilities incrementally across existing products rather than pursue a single, transformative AI product - a strategy that carries execution risk in a market where visible innovation is a major competitive factor.
Near-term market catalysts to watch
- Developments in the Middle East and any updates on the U.S.-Iran ceasefire talks
- Energy market price moves
- Japan trade data for March
- South Korea producer price inflation for March
- Interest-rate decisions in Indonesia and Turkey
- UK PPI and CPI inflation data for March
- Euro zone consumer confidence for April
- Speeches from European Central Bank officials, including President Christine Lagarde and board members Philip Lane, Piero Cipollone, Sharon Donnery, and Frank Elderson
- U.S. Treasury auctioning $13 billion of 20-year bonds
- U.S. corporate earnings due from Tesla, Lam Research, GE Vernova, IBM, AT&T, Texas Instruments and Boeing
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