Rates love an open Hormuz
Strait of Hormuz Reopening Boosts Markets
On Friday, Iran announced the full opening of the Strait of Hormuz. Oil, bond, and stock markets rallied, sending rates to their lowest levels since early March. It is only open until the end of the US-Iran ceasefire, which ends on the 22nd. But when combined with the Israel/Lebanon 10-day ceasefire, the markets seem hopeful of a continuation beyond these deadlines.
Cotality Rental Index Shows Slow Rent Growth
Cotality released their Rental Index for February, which showed that rent went up only 1.1% year over year, the slowest pace since 2010. That is good news for shelter costs, the biggest componentof the Consumer Price Index (CPI).
PPI Report Shows Softer Inflation Pressure
The Producer Price Index (PPI) for March shows wholesale inflation before it gets to consumers. Headline inflation rose 0.5%, a large number but lower than the 1.1% expected. The prior report was also revised lower by 0.2%. This report does include the rise in energy prices due to the Iran conflict and was closely watched to see how inflation would react. Yearly, the Headline Producer Inflation rose from 3.4% to 4.0%. The Core rate, stripping out volatile food and energy prices, only rose 0.1% monthly. The markets were expecting 0.5%. Yearly, Core Producer Inflation remained at 3.8%, better than what markets feared from the Iran conflict.
Michigan Sentiment Hits Record Low Levels
The University of Michigan Consumer Sentiment for April fell to 47.6, a record low since they started tracking in the 1970’s. The employment component fell to 41 from 52, near the lowest since the Great Recession. The income index fell to -4. There is very little fear of wage-pressured inflation with these results. This also contradicts the BLS’s Jobs Report that showed strong job growth. The BLS is becoming the clear outlier.
Looking Ahead: What to Watch Out for Next Week
- Tuesday, April 21: ADP Weekly Employment Data, Retail Sales, Pending Home Sales
- Wednesday, April 22: 20-Year Auction
- Thursday, April 23: Jobless Claims
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