First Light News: Vagueness and More Extension Deadlines

Trump’s Cabinet Meeting Was a Must-watch

President Trump held his 11^th cabinet meeting yesterday and spoke at length about the conflict in the Middle East. I am sure I will get flak for this, but I just thought Team Trump’s style and all-or-nothing drama yesterday reminded me of a movie, and not of the official government.

The so-called gift from Tehran that Trump repeatedly mentioned was a handful of vessels being allowed through the Strait of Hormuz, which he has seemingly taken as a diplomatic green light. Aside from this, traffic through the Strait is still limited.

This one also really caught me off guard: Pete Hegseth – the Secretary of War – stated that the ‘US is negotiating with bombs’, while at the same time desiring peace. Is no one in the White House saying anything about that? Surely, this must have raised a few eyebrows.

Meanwhile, US airports are descending into queueing chaos because of a DHS shutdown that Trump blames entirely on the Democrats, and apparently, random people at airports are now furious at Chuck Schumer specifically, which the President found delightful.

Second Extension

It did not end there. Overnight, via his Truth Social platform, Trump announced a 10-day extension until 6 April, at 8:00 pm ET – this marks the President’s second delay since the conflict began on 28 February. Specifically, this is a pause on striking key Iranian energy infrastructure.

As shown in Trump’s post below, this extension was due to an ‘Iranian government request’, and that talks are ‘going very well’. I am still unclear who Trump’s Team is negotiating with; he made it clear that Iran’s leaders were all killed, so who is doing the talking? According to Fox News, the President also noted that Iran initially sought a 7-day extension, but the Don graciously granted them 10 days. Note that Iran has since denied this. It looks like it will be another day of mixed messages. Honestly, it is hard to know who to believe at this point, making trading these markets even more challenging.

The WSJ also reported that the Pentagon is weighing sending an additional 10,000 ground troops – including infantry and armoured vehicles – to the region, on top of roughly 5,000 Marines and paratroopers from the 82^nd Airborne already en route. If the war is complete as Trump claims, and Iran has no army, why would the US be sending more troops to the area?

Are Markets Calling Trump’s Bluff?

Oil prices finished the day on the front foot, with Brent settling back above US$100/barrel. Commodity traders clearly did not buy into Trump’s de-escalation commentary, which is understandable. Brent is currently higher by nearly 2% this morning. Sustained oil prices north of US$100 will clearly cement a more volatile market environment. Essentially, for stocks to gain a footing, oil prices must drop – oil is a fundamental input for crucial industries.

In the equities space, US benchmarks were red across the board. The S&P 500 fell 114 points (1.7%) to 6,477, with most stocks finishing the day in negative territory, and 8 of 11 sectors underwater. The Nasdaq 100 shed 575 points (2.4%) to 23,586, with technology stocks underperforming. Of note, all key US averages are extending downside south of their 200-day SMAs, with the Nasdaq edging closer to that elusive ‘Death Cross’ territory.

US Treasury yields bear-flattened as elevated oil prices raised concerns about more persistent inflationary pressures, with the USD index also catching another bid. This represents a third consecutive session in the green for the buck, largely bolstered by safe-haven demand.

UK Retail Sales Fall in February: GBP Trades Modestly Lower

Earlier this morning, the UK February retail sales landed, showing a MM decline of 0.4% from an upwardly revised gain of 2.0% in January. Retail sales (excluding fuel) also fell by 0.4%, down from an upwardly revised reading of 2.2%.

The UK economy is being hit from multiple directions right now, including elevated inflationary pressures, rising bills, and falling confidence. This will see consumers delay purchases, which, of course, adds to already soft GDP growth. The GBP has since modestly sold off versus the USD this morning, currently trading off session highs and down around 0.1% as of writing.

The day ahead is pretty much thin on the macro front, and we begin looking to next week’s US jobs report.

Have a wonderful weekend!

Written by FP Markets Chief Market Analyst Aaron Hill