IRAN: Fars-Iranian Navy Seizes Ocean Koi Tanker

• In the equity space, a strong rally in S&P E-Minis today highlights an extension of the reversal that started Mar 31. Note that trend signals remain bearish and for now, gains are considered corrective. A continuation higher would open 6921.09, the 76.4% retracement of the Jan 28 - Mar 31 bear leg. Key medium-term resistance and the bull trigger is far off at 7096.50, the Jan 28 high. Initial firm support to watch lies at 6567.00, the Apr 6 low.
• A gap higher today in EUROSTOXX 50 futures strengthens a short–term bullish theme and highlights an extension of the reversal from the Mar 23 low. The contract has traded through both the 20- and 50-day EMAs, paving the way for a climb towards 5945.47, the 76.4% retracement of the Feb 26 - Mar 23 bear leg. Note that a break of 5945.47 would expose the key resistance at 6143.00, the Feb 26 high. First key support to watch lies at 5525.00, the Apr 2 low.

The recent recovery in gilt futures has allowed an oversold condition to unwind, with our technical analyst still deeming the recovery to be corrective at this stage.

• Meanwhile, 10-Year UK gilt yields have retraced to operate back within the medium-term triangle parameters we had been monitoring across recent months.
• While the breaks on either side of the pattern in recent weeks negate the importance of the formation going forwards, the respect of the upper boundary during last week’s pullback in yields provided a point of note.
• That former boundary has been breached this morning, with gilt bulls now targeting the 50% retracement of the move from the February low to the March high in yields (4.676%), which protects the March 18 low (4.642%).
• The multi-week range now provides well-defined, albeit wide, horizontal boundaries (4.231% & 5.121%).
• Expect geopolitical and cross-market matters to continue to dominate in the immediate term, with heightened sensitivity to headlines in the lead up the U.S.-Iran discussions, set to start on Friday.
• Medium-term, the mix of the UK’s fiscal trajectory, political risks and BoE monetary policy settings are set to provide plenty of domestic inputs for gilts to adjust to.

Fig. 1: UK 10-Year Gilt Yield (%)

Source: MNI - Market News/Bloomberg Finance L.P.

Oil trades away from lows in the wake of headlines pointing to UAE & Kuwaiti defences dealing with attacks/missile threats despite the U.S.-Israel-Iran ceasefire agreement, with equities and bonds lower. Subsequent comments from U.S. Vice President Vance note the truce is "fragile".