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• European markets weaken as German business confidence lacks momentum
• Oil in focus amid concerns around Iran strikes, Canadian tariffs, and Russia-Ukraine talks
• US shutdown likely, while Fed seek to prop up JPY as Rieder takes the lead in Fed Chair betting markets 

A downbeat start for European markets today with equities taking the back foot as traders once again look to the precious metal space for consistent returns. In a week filled with potential volatility, traders have to weigh up the direction of travel once Wednesdays FOMC meeting and mag7 earnings are out the way. While today’s economic calendar remains relatively light, the release of German Ifo business climate and US durable goods data provide two areas of note. For now, German sentiment appears to be stuck around historically low levels, remaining at 87.6 despite forecasts of a rise to 88.3. Once again, we see the German economy moving forward with little momentum, as businesses struggle against a backdrop of ever changing trade conditions that once again seemed to shift after the EU cancelled their agreement with the US in response to their overtures for Greenland. With VW CEO Oliver Blume stating that they will likely cancel their plans for an Audi factory in the US unless there is a reduction in auto tariffs, many businesses are struggling to know whether it is the right thing to invest or standstill in such an unpredictable environment.

The US remains the main source of uncertainty and volatility, with the current questions marks centering around the perspective strikes on Iran after the US moved a fleet of warships and accompanying aircraft into the region. Iranian threats that they could in turn strike US aircraft carriers if necessary does highlight the risks involved with such an attack, with other concerns centring around the potential closure of the straits of Hormuz. That bottleneck sees roughly 20% of the world’s oil pass through it, predominantly from the likes of Saudi Arabia and Iraq. Meanwhile, Trump’s threat of 100% tariffs on Canada threw up another potential curveball for the energy market, with the vast majority of Canadian oil exports going to their neighbour. Nonetheless, it appears to be the case that tensions have simmered, with Canada noting that they would not strike a free-trade agreement with China but instead lowered specific tariff levels. Finally, we have the Russian-Ukraine issue, with weekend negotiations once again resolving without a breakthrough (unsurprisingly). However, with both sides agreeing to continue discussions next weekend, there is at least a hope that we could be heading in the right direction.

It is little surprise to see gold and silver pushing higher once again this morning, with Polymarket odds spiking to 77% for a government shutdown by the end of the week. Coming off the back of the fatal shooting of US citizen Alex Pretti in Minneapolis, hopes of passing the funding bill by Friday have taken a hit as Senate Democrats look likely to push back. Once again this is an example of the dysfunctional political environment in the US, with the country seemingly more polarised than ever. Meanwhile, the US Federal Reserve have their hands full, with the bank seemingly having to spearhead a push to prop up the Japanese yen as yields rise and the yen sinks further. This comes in a week that sees the focus around the Fed centre on who could lead them in May as much as what they will do with rates at Wednesday’s meeting. With markets pricing a cautious approach from the Fed in the first half of the year, perhaps the more interesting development is the fact that markets now see BlackRock's CIO Rick Rieder as the frontrunner for the Fed Chair position in May. With Trump seemingly trying to find a Chair that combines both credibility and a willingness to run the economy hot, many will hope that whoever takes over will try to push rates lower in H2.

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