WS #7898

The dominant narrative remains the Iran war and its economic fallout, which is escalating. Iran has rejected a U.S. peace counteroffer, prolonging the Strait of Hormuz blockade. Over 160 oil tankers are stuck in the Gulf, and Brent crude spot prices surged to a $25+ premium over futures. The U.S. allowed a Russian oil waiver to expire, adding supply uncertainty. In response, the IEA coordinated an emergency release of strategic stocks, and the U.S. SPR has released 17.5 million barrels since March. This counters some of the bearish energy supply thesis but does not resolve the core disruption. Inflation data confirms the pass-through: U.S. CPI hit 3.8% annually (highest since May 2023), PPI surged 6% annually, and consumer sentiment fell to a record low of 48.2. The Fed faces a dilemma: markets now price a ~37% chance of a rate hike by year-end, and incoming Chair Warsh inherits a committee with dissents over the easing bias. The ECB and BOE both kept rates on hold but face stagflation risks. In tech, OpenAI is preparing for a confidential IPO filing as soon as Friday, with banks Goldman Sachs and Morgan Stanley. This is a high-signal event for the AI sector. Separately, Nvidia reported a strong beat-and-raise quarter (data center revenue nearly doubled), but the stock slid post-earnings, continuing a pattern of post-earnings weakness. The AI infrastructure investment theme remains intact but faces valuation scrutiny. In China, margin trading hit a record high as tech stocks rally, and Alibaba teased new Qwen AI models. The Trump-Xi summit discussed AI guard rails and Nvidia H200 chip exports, with China treating it as a sovereign decision. This could open a pathway for chip sales to China, a positive for NVDA and AMD. AMD CEO Lisa Su met with China's vice-premier, signaling potential loosening of export controls. The MAG7 narrative is mixed: Nvidia's strong results but weak price action contrasts with AMD and Intel surging on AI CPU demand. Meta announced 8,000 layoffs, moving 7,000 employees to AI roles, signaling aggressive AI pivot. Anthropic is in talks with Microsoft for Maia 200 AI chips, and also reportedly paying SpaceX $45B for AI compute. These deals underscore the massive compute demand. Oil prices rose 2.2% (WTI $100.40, Brent $106.90) on fresh Iran peace talk hurdles. The AvalonBay-Equity Residential merger creates a $50B REIT, signaling consolidation in multifamily real estate. BioMarin stock soared on positive dwarfism study data. Rocket Lab surged 34% on record launch deal and revenue beat. Allstate shares fell on April catastrophe losses. The DNC released its 2024 election autopsy report. Senate GOP postponed ICE funding bill due to fight over Trump's 'anti-weaponization' fund. UK Chancellor Reeves to unveil cost-of-living relief. Russia threatens NATO member over Ukraine drones. Waymo paused Atlanta service after robotaxis drove into floods. Anthropic's Mythos AI tool poses new cyber risks for Japanese banks. The ECB's Schnabel warned of 'quiet erosion' of central bank independence. The FDA approved first gene therapy for genetic hearing loss and advanced psychedelic treatments for mental health.