【Zhenzhuo Finance】US and Iran may extend ceasefire by two weeks; Chinese and US heads of state exchange letters
The U.S. and Iran are reportedly considering extending the ceasefire agreement by two weeks, with Trump claiming that Xi Jinping confirmed to him that China has not provided weapons to Iran. The Fed's Beige Book shows a significant increase in energy costs. China has allowed foreign banks' onshore institutions to expand their overseas lending scale. The GDP report is expected to show a rebound in China's first-quarter economy.
Overnight Highlights
Boosted by corporate earnings reports and optimistic expectations of progress in U.S.-Iran negotiations, the S&P 500 and Nasdaq both hit record highs in the stock market, while European stocks generally closed lower due to caution over the Middle East situation. In the currency market, the U.S. dollar index edged down near the flat line as investors assessed the possibility of peace talks resuming. In the oil market, persistent concerns about supply disruptions offset the impact of rhetoric that the war might end soon, keeping international oil prices generally stable. Finally, in the metals market, gold prices fell slightly after hitting a near-one-month high as investors comprehensively evaluated the latest developments in the U.S.-Iran situation and interest rate prospects.
International News
The U.S. and Iran are reportedly considering extending the ceasefire agreement, which expires next Tuesday, by two weeks to buy more time to advance peace talks. The Associated Press said the U.S. and Iran "agreed in principle" to extend the ceasefire, but the White House press secretary denied that the U.S. had requested an extension of the ceasefire with Iran.
Iran's Foreign Ministry said Iran's right to the peaceful use of nuclear energy "cannot be taken away," but the level and type of uranium enrichment are negotiable.
Trump said Chinese President Xi Jinping exchanged letters with him and told him that China has not provided weapons to Iran. Bessent praised U.S.-China relations as "highly stable," saying the leaders' meeting will be held as scheduled in mid-May.
Chinese Foreign Minister Wang Yi spoke with his Iranian counterpart, reiterating that Iran's sovereign security and legitimate rights and interests in the Strait of Hormuz should be respected.
The Fed's Beige Book showed economic activity continued to grow in early April, with overall price increases remaining moderate, but energy and fuel costs rose significantly in all districts, with price pressures spreading beyond the energy sector.
The St. Louis Fed President believes rising oil prices could push up core inflation, and it may be appropriate to keep interest rates unchanged for some time. The Cleveland Fed President expressed similar views.
Trump hinted he would not drop the investigation into Fed Chairman Powell, warning he would fire him if he did not step down "in a timely manner." Senate Majority Leader Thune told Trump that ending the investigation into Powell is in everyone's best interest.
Trump cited the late Supreme Court Justice Ginsburg as an example, suggesting older, more conservative justices should consider retiring early.
The U.S. Treasury Department added several oil tankers to the Iran-related sanctions list. Shipping volume through the Strait of Hormuz is currently well below pre-war levels. It is reported that Iran is considering proposing to allow ships to pass freely through the Omani side of the Strait of Hormuz during negotiations with the U.S.
As the Iran war prompted buyers to seek alternatives to Middle Eastern crude, total U.S. oil exports, including crude and refined products, surged to a record high last week.
U.S. Treasury Secretary Bessent said the Trump administration will not renew the general license that allows temporary sales of some Iranian and Russian oil.
The U.S. Commodity Futures Trading Commission is reportedly investigating a series of oil futures trades that appeared in the market before Trump's Iran policy shift. CME Group and ICE are being asked to provide identity information on the entities behind the trades.
Foreign holdings of U.S. Treasuries reached a record level in February, with the largest increase in a year, while China's holdings declined. The IMF warned that Washington's growing debt issuance is eroding the safety premium on U.S. Treasuries and pushing up borrowing costs globally.
Japan's Finance Minister said he had a full discussion with the U.S. Treasury Secretary on foreign exchange issues and is prepared to take decisive action on the exchange rate if necessary. The yen pared losses on such remarks, as such language has often signaled intervention in the past to support the yen.
Sources said European Central Bank policymakers are inclined to keep interest rates unchanged this month to watch the impact of the Iran war. The head of Germany's central bank said a rate hike in April cannot be ruled out.
Despite record first-quarter profits, four of Wall Street's six largest banks have implemented layoffs, cutting more than 5,000 positions in total. Bank of America's CEO praised the new development space brought by artificial intelligence.
Boosted by market volatility, Bank of America and Morgan Stanley's first-quarter equity trading revenues both hit record highs.
The U.S. Treasury Department has reportedly asked private credit companies to disclose their business models and other more information, but Treasury Secretary Bessent said no systemic problems have been shown so far.
The U.S. government said tariff refunds may be delayed because only a small number of importers have completed the application preparation work.
Greater China News
China will release heavyweight data including GDP on Thursday. Boosted by the supply side, first-quarter GDP growth is expected to rebound, while consumption may remain weak, with March retail sales growth expected to slow.
The People's Bank of China raised the overseas loan leverage ratio for wholly foreign-funded banks in China, Sino-foreign joint venture banks in China, and branches of foreign banks in China from 0.5 to 1.5, aiming to encourage foreign banks in China to expand lending overseas.
China's State Council called for increased scrutiny of project approvals and financing to prevent local government debt risks.
China's March bank foreign exchange sales and bank client cross-border payments both expanded significantly, hitting record highs.
China is seeking public comments on accelerating the construction of industry datasets to support AI innovation. The plan proposes exploring new trading models such as token trading.
Alibaba Cloud will raise the service price for some model units of its large model service platform "Bailian" starting May 15.
Alibaba plans to launch its first quadruped robot soon to compete with products such as Unitree's Go series.
The U.S. Treasury Department sent letters to two Chinese banks over Iran, warning they could face secondary sanctions.
Research data shows that as the number of foreign tourists visiting the U.S. has dropped sharply, China is expected to become the world's largest tourism economy in a few years.
Sigenergy will list on the Hong Kong Stock Exchange on Thursday with an issue price of HK$324.20. The stock soared more than 100% in grey market trading on Wednesday.
Interfax: The Russian government may issue yuan-denominated sovereign bonds in May.
CATL will set up a subsidiary with registered capital of 30 billion yuan to ensure supply chain security. It is also reported that the company is seeking to be removed from the U.S. Department of Defense's list of Chinese military-linked companies, with co-chairman Pan Jian traveling to the U.S. at least twice to lobby.
Commodities and Forex Market
The Bloomberg Dollar Index fell for an eighth consecutive day, its longest losing streak in nearly six years, with the Australian dollar leading gains among G-10 currencies as expectations for U.S.-Iran peace talks heated up.
Oil prices were largely stable as the market weighed falling U.S. oil inventories against the prospect of U.S.-Iran peace talks.
Earnings and Economic Data Focus
U.S. Initial Jobless Claims (week to Apr 11) (Previous: 219K; Forecast: 215K)
U.S. Philadelphia Fed Manufacturing Index (Apr) (Previous: 18.1; Forecast: 10)
Source: Golden Horse Capital Management (Hong Kong) Limited
Author: Terry Chow
Proofreader: Penny Yang
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