WS #6281

The dominant narrative remains the Iran war and its inflationary impact, with several key developments in this window. The US PCE inflation gauge jumped to 3.5% in March, the highest in nearly three years, driven by surging gas prices. This confirms the stagflationary pressure from the conflict and reinforces the Fed's hawkish stance. The UK raised its terror threat level to 'severe' following the Golders Green stabbing, adding a geopolitical risk premium. Oil prices remain elevated but showed intraday volatility, with Brent briefly touching $126 before falling back below $118. The IEA warned of potential physical jet fuel shortages in Europe as Middle East shipments have halted. On the corporate side, several earnings beats and analyst upgrades are notable: Parker Hannifin reported record backlog and raised guidance; Quanta Services rallied on infrastructure demand; Western Digital surged on AI memory demand; and Blue Owl Capital surged after disclosing 10x returns on its SpaceX investment. However, Meta's stock fell on concerns over high AI spending. The JANA Partners letter to Markel Group calling for divestiture and buybacks is an activist signal. The UK terror threat escalation and the PCE inflation data are the highest-significance items, as they directly impact macro sentiment and sector positioning. In this window, the UK terror threat level was raised to 'severe' by the Joint Terrorism Analysis Centre, corroborated by multiple sources including BBC, Guardian, and official government statements. This follows the Golders Green stabbing and is likely to increase security spending and risk premiums for UK-exposed assets. The US PCE inflation data confirmed a 3.5% year-over-year increase, the highest since May 2023, driven by a 24.1% surge in gasoline prices due to the Iran war. This reinforces the Fed's hawkish stance and reduces the likelihood of rate cuts. Oil prices remain volatile, with Brent crude briefly touching $126 before settling around $114, as US-Iran tensions continue. The House voted to end the 75-day DHS shutdown, which may reduce near-term political uncertainty but does not change the macro picture. Eli Lilly reported a massive beat-and-raise, surging 10% on strong GLP-1 demand, which counters the recent healthcare sector rotation. MARA announced a $1.5B acquisition of a power plant for AI infrastructure, sending shares up 12%. KKR is preparing a new $10B AI firm led by ex-Amazon Web chief, signaling continued private capital deployment into AI. The Senate unanimously banned lawmakers from trading prediction markets, which may impact platforms like Kalshi and Polymarket. The UAE left OPEC, a significant development that could reshape oil market dynamics. The European Commission approved a temporary state aid framework for energy-intensive sectors, which may provide some relief to European industrials. The Fed's PCE data and the UK terror threat are the most market-moving items, with the former reinforcing stagflation fears and the latter adding a geopolitical risk premium.