The responsible Rogue Nation

Thoughts of the Day

Iran retaliated against Israeli airstrikes which killed a top commander earlier in April with over 300 drones and missiles. It was carried out with advance warning, ensuring Israel and its allies were well prepared to foil the attack. They did it on the weekend when the global financial markets were closed and could not respond but the crypto market is always opened and sold off aggressively in response. Today, US futures rose, signaling relief as Iran indicated no intention to escalate tensions.

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Week Ahead


Tuesday: Chinese economic data will be released. GDP Growth rate for Q1 is expected to come in at +5%, down from +5.4% previously.

Inflation data from Canada is slated to be released. No expectations for the data were given.

Wednesday: The Euro Area Inflation is expected to show that prices rose +2.4% Year-on-Year in Mar, down from +2.6% in Feb. The core rate is expected to come in at +2.9% in Mar, down from +3.1% in Feb.

Inflation data from the UK in terms of Consumer Price Index and Producer Price Index are expected to be released as well. No expectations for the data were provided.

Thursday: Australian employment and labour data are slated to be released, no expectations for the data were provided.

Friday: Japanese Inflation is slated to be released, no expectations for the data were provided.

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What Happened Yesterday

Market Movements as of New York Close 12 Apr 24 (14 Apr for Crypto)

Collins (2025 voter, known centrist):
“Still expecting inflation pressures to wane later this year.” “A rate hike is not part of the baseline but can’t be fully ruled out.” “Sees ‘in the range of two’ rate cuts for 2024”
(Collins remains on the side of data dependency.)

Following warnings of an impending attack on Israel as a form of retaliation over the killing of a senior official in the Iranian embassy in Damascus, Iran attacked Israel on Saturday (early Sunday morning in Asia timezone) with a drone and missile strike. Most of them were intercepted or failed to strike their targets and there was no major damage and one known casualty (an injured child). 

The University of Michigan reported a slight decrease in U.S. consumer confidence, dropping to 77.9 (vs 79 expected) from March’s high of 79.4. At the same time, expectations for inflation over the next year rose to +3.1%, the highest in four months, up from +2.9% in March. Similarly, the five-year inflation outlook increased to +3%, the highest in six months, from +2.8%. This suggests growing concerns that the pace of inflation reduction may be slowing down. The S&P 500 saw a -0.27% fall in immediate reaction.

The US Treasury Yield curve inversion widened slightly to 0.38% as the US 2-year bond yield slipped -0.05% to 4.88% while the 10-year yield fell -0.06% to 4.50%.

The US stock futures traded sideways through the Asian trading session on Friday. It then started to falter when the London trading session started, causing the S&P 500 futures to be down -0.76% when the New York session started.

The US stock market opened lower from Thursday. It then continued to trade lower for the rest of the New York session as risk sentiment dampened over the warnings of an Iranian strike on Israel. The S&P 500 finished -1.46% lower (high: -0.46%, low: -1.75%), the Dow Jones fell -1.24% (high: -0.36%, low: -1.51%) while the Nasdaq plunged -1.66% (high: -0.77%, low: -1.94%).

The crypto market weakened on Friday during the New York session because of the fear of an imminent Iranian attack, with Bitcoin falling as low as 65,133 before recovering slightly to the 67,000 level. It then came crashing on Saturday (Sunday early morning in Asia) as Iran launched their attacks on Israel.  Bitcoin fell as low as 61,596 (-12% from Thursday, hit below 60k on some crypto exchanges in the panic) while Ether fell as low as 2,864 (-18.3% from Thursday) as panic selling and liquidations were triggered. The Iranian mission to the United Nations stated on X (formerly known as Twitter) at 6 am SGT on Sunday that the matter can be deemed as concluded in a clear sign that they did not want to risk further escalation. Bitcoin has stabilised at the 65,000 level ever since.
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Headlines & Market Impact

Iranian notice of attack may have dampened escalation risks

Notable Snippet: Iran’s Foreign Minister Hossein Amirabdollahian said on Sunday Iran had given neighbouring countries and Israel’s ally the United States 72 hours’ notice it would launch the strikes, a move that would have enabled them to largely thwart the attack.

However, a senior official in the administration of U.S. President Joe Biden denied Amirabdollahian’s statement, saying Washington had had contact with Iran through Swiss intermediaries but did not get 72 hours’ notice.

Tehran sent the United States a message only after the strikes began, and the intent was to be “highly destructive”, said the official, speculating that Iran was saying it had given notice in order to cover embarrassment at the attack’s failure.

“We received a message from the Iranians as this was ongoing, through the Swiss. This was basically suggesting that they were finished after this, but it was still an ongoing attack. So that was (their) message to us,” the U.S. official said.
An Iranian source briefed on the matter said Iran had informed the U.S. through diplomatic channels that included Qatar, Turkey and Switzerland about the scheduled day of the attack, assuring it would be conducted in a manner to avoid provoking a response.

How far escalation can be avoided remains in question. Biden has told Israel the United States will not join any Israeli retaliation, the U.S. official said.

However, Israel is still weighing its response and will “exact the price from Iran in the fashion and timing that is right for us”, Israeli minister Benny Gantz said on Sunday.

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Surging inflation fears sent markets tumbling and Fed officials scrambling

Notable Snippet: “Fool me once, shame on you. Fool me twice, shame on me,” Harvard economist Jason Furman told CNBC this week. “We’ve now had three months in a row of prints coming in above just about what everyone expected. It’s time to change the way we think about things going forward.”

Even import prices, an otherwise minor data point, contributed to the narrative. In March, it posted its biggest increase for a three-month period in about two years. All of it has amounted to a big headache for markets, which sold off through most of the week before really hitting the skids Friday.

In contrast, heading into the year markets saw an accommodative Fed poised to cut interest rates early and often — six or seven times, with the kickoff happening in March. But with each months’ stubborn data, investors have had to recalibrate, now anticipating just two cuts, according to futures market pricing that sees a non-zero probability (about 9%) of no reductions this year.

A bright spot for the Fed is that the economy has been able to tolerate high rates, with little impact to the employment picture or growth at the macro level. However, there’s worry that such conditions won’t last forever, and there have been signs of cracks in the labour market.

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China remains crucial for U.S. chipmakers amid rising tensions between the world’s top two economies

Notable Snippet: Data from S&P Global showed that U.S. chip giants Intel, Broadcom, Qualcomm and Marvell Technology all generate more revenue from China compared with the U.S. 

The U.S. has passed a series of export controls starting in October 2022 aimed at restricting China’s access to advanced chip technology, particularly those used in AI applications.

“China remains an important market for U.S. chipmakers, and the U.S. restrictions on selling advanced AI chips to China have been designed specifically to allow most U.S. firms to continue selling most types of chips to Chinese customers,” Chris Miller, author of “Chip War,” told CNBC.

Used in a wide range of products, from smartphones to electric vehicles, semiconductors have become a top priority for governments globally. 

According to data from tech consultancy Omdia, China consumes nearly 50% of the world’s semiconductors as it is the biggest market for assembling consumer devices. 
The Chinese government is “increasingly focused” on getting its firms to buy locally made chips, Miller said. “Unless foreign companies have a substantial technological advantage over domestic Chinese competitors, they will lose market share in China.” 

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Stock Indices

Phan Vee Leung
CIO & Founder, TrackRecord