Summary:
- Diplomacy hopes lift sentiment; oil eases on Iran talk optimism
- US-Iran talks ongoing, with potential new round this week
- Central banks remain hawkish (RBA, MAS tighten stance)
- Australian business confidence collapses sharply
- China trade shows weak exports, strong imports
- USD weakens for seventh straight session; FX broadly firmer
There were some tentative rays of optimism for markets, driven by renewed hopes of diplomacy in the Middle East.
AP reported, citing U.S. officials, that another round of talks between Washington and Tehran could take place as soon as Thursday. This followed Reuters reporting that negotiations remain alive despite the lack of a breakthrough over the weekend. U.S. Vice President JD Vance reinforced the constructive tone, saying talks made “a lot of progress” and that a broader deal remains possible, with the “ball in Iran’s court.”
Markets took this as a modest positive. Oil prices eased on the back of the comments, with the prospect of a diplomatic resolution helping to temper immediate supply concerns tied to the Strait of Hormuz. That said, key sticking points remain, including Iran’s nuclear programme, the reopening of Hormuz, and sanctions relief. Reports suggest the sides came close to an agreement before talks stalled, with dialogue continuing via intermediaries.
On the geopolitical front, attention also turns to talks involving Israel and Lebanon, with U.S. Secretary of State Marco Rubio set to participate in preparatory discussions aimed at addressing tensions with Hezbollah.
In central bank developments, the tone remains firmly hawkish. RBA Deputy Governor Hauser warned inflation is still too high and flagged a stagflation risk, adding bluntly that rates will need to rise further to bring CPI back to target. Meanwhile, MAS tightened policy by increasing the slope of its S$NEER band, citing rising imported inflation.
Data flow reinforced the challenging macro backdrop. Australian business confidence collapsed in March, with the NAB index plunging to -29 from 0, one of the sharpest declines on record, even as conditions held steady at +6. The AUD slipped modestly despite the hawkish RBA tone, with NZD also softer.
China’s trade data showed a clear divergence. Exports rose just 2.5% y/y (vs 8.6% expected), while imports surged 27.8% (vs 11.2%), sharply narrowing the trade surplus. The data points to resilient domestic demand but weakening external conditions amid energy-driven cost pressures.
In FX, the dollar remained on the back foot, heading for a seventh straight daily decline. The DXY hovered near its lowest levels since early March, while the euro, sterling, and yen all firmed.
Equities reflected a stabilisation in sentiment, with Japanese and South Korean stocks trading near pre-war highs.
On the political front, Canada’s Prime Minister Mark Carney secured a parliamentary majority, strengthening his position amid ongoing trade tensions with the United States.
