Ten Stories Moving the Market

U.S. President Donald Trump promised a quick second round of U.S.-Iran talks in Islamabad this week, while again threatening to strike all power plants and bridges in the country if the negotiations fail – Bloomberg. (Why you should care – Iran said communications are being sent back and forth via intermediary countries)

Iran’s quick reversal of the reopening of the Strait of Hormuz has laid bare a rift between the country’s political leaders and the military hard-liners who have deepened their hold on the government since the war began; while mediators say the U.S. and Iran have shown some flexibility in talks, the episode in the strait shows that those expressing a willingness to compromise might not have the full backing of Iran’s hard-liners – WSJ. (Why you should care – the back-and-forth imply a resolution may not be found quickly)

U.S. Energy Secretary Chris Wright said average gasoline prices may not return to pre-Iran war levels under $3-per-gallon until next year; Wright said gasoline prices have likely peaked, and they'll start going down, certainly with a resolution of the Iran conflict – AXIOS. (Why you should care – such an outcome would diminish the chances of inflation growth hitting the Fed’s 2% target by year end)

Iran’s parliament speaker and top negotiator Mohammad Bagher Ghalibaf said his country and the U.S. have made progress in the negotiations for a peace deal but there is still a significant distance between the two states; Ghalibaf said Tehran wanted assurances that attacks won’t happen again – WSJ. (Why you should care – the conflicting statements from Iran over the weekend point to a rift among the country’s different ruling factions)

The White House said that the U.S. had seized an Iranian-flagged ship in the Gulf of Oman, the first known use of force in the U.S. blockade; U.S. Central Command said the Touska refused to heed repeated warnings – FT. (Why you should care – U.N. Ambassador Mike Walz said the U.S. is prepared to ratchet up the naval blockade)

The White House ​renewed a waiver allowing countries to buy sanctioned Russian oil at sea for about a month; the U.S. Treasury Department's waiver lets countries purchase Russian oil and petroleum products loaded on vessels as of Friday through May 16, replacing a 30-day waiver that expired on April 11 – Reuters. (Why you should care – the White House is trying to keep a lid on oil prices with Iran negotiations ongoing)

The United Arab Emirates has begun talks with the U.S. about a financial backstop in case the Iran war plunges the country into further crisis; UAE Central Bank Governor Khaled Mohamed Balama raised the idea of a currency swap line with Federal Reserve and U.S. Treasury officials – Bloomberg. (Why you should care – past liquidity backstops have helped to stabilize stock and bond markets as foreign investment funds are less worried about access to cash)

Domestic factory output has risen briskly and may even be picking up speed; a surge in demand for AI- and aerospace-related goods has played to the strengths of the American manufacturing system – WSJ. (Why you should care – rising productivity and efficiency should help support domestic economic growth)

Federal Reserve Chair Nominee Kevin Warsh is scheduled for confirmation hearings on Capitol Hill this week; Warsh is expected to indicate that he still favors easing interest rates further – Bloomberg. (Why you should care – Warsh is not expected to be confirmed before Chair Powell’s term ends next month)

Alphabet's Google is in talks ​with Marvell Technology to develop two ‌new chips aimed at running AI models more efficiently; one of the chips is a ⁠memory processing unit designed to work with ​Google's tensor processing unit (TPU) and the other ​chip is a new TPU built specifically for running AI models, according to a report in The Information – Reuters. (Why you should care – the custom ASIC market for AI data centers is expected to hit $118 billion by 2033, with Marvell capturing a 20% to 25% market share)

Economic Calendar:

Earnings – AGNC, ALK, BOH, CLF, WTFC, ZION

China – PBoC Loan Prime Rate for April

Canada – CPI for March (8:30 a.m.)

BOC business outlook survey (10:30 a.m.)

Treasury Auctions $89 Billion in 13-Week Bills (11:30 a.m.)

Treasury Auctions $77 Billion in 26-Week Bills (11:30 a.m.)

ECB’s Lagarde (President) Speaks (12:40 p.m.)