13/04/26: Ceasefire, oil prices & US inflation data

In this week's episode of the Monday Espresso podcast, the team discuss recent events and look to the week ahead.

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Monday Espresso Podcast - 13th April 2026

[00:00:00] Rory Dowie: Good morning, today's Monday the 13th of April, and today I'm delighted to be joined for the second time as many weeks by bond fund manager, Mr. James Athey, I nearly said James Bond there, James, but good morning.

[00:00:12] James Athey: There is definitely a large, large gap between me and James Bond.

[00:00:16] James Athey: Morning Rory, thank you for having me back.

[00:00:19] Rory Dowie: We had more positive news last week with a ceasefire announcement, obviously, but we also had US inflation data and some news out of Anthropic, the AI lab behind Claude.

[00:00:28] Rory Dowie: Before we get to that though, equity markets, they had a strong week. The US and Europe were up just under 4%. The UK 2.5%, whilst Japan and Asia markets, they were really leading the way and they, they're up between 5% and 8%.

[00:00:40] Rory Dowie: So, James clearly markets were liking the news of the ceasefire. Can you give our listeners a bit more detail on what that entailed?

[00:00:47] James Athey: Yeah, I mean I can't give detail on what it entailed really, because I don't think we know clearly, just the announcement of anything approaching a ceasefire was unequivocally a positive, you know.

[00:00:58] James Athey: We ourselves, and I think everyone writing for newspapers or investors that were having this conversation was really struggling to see, where the off-ramps were, the tone from Iran was quite belligerent and quite entrenched, and it didn't sound like they were ready to negotiate any sort of ceasefire.

[00:01:17] James Athey: And for that to come as quickly as it did was unequivocally positive, and of course, markets have reacted as you would expect. Equities up, oil down, bond yields down, and some weakness in the US dollar.

[00:01:29] Rory Dowie: Brilliant, and we spoke last week a lot about inflation and the impact of the war on inflation and what that might mean for rate cuts or as you alluded to, potential rate rises later in the year.

[00:01:40] Rory Dowie: Last Friday, we had inflation data out to the US and that was the first month where we had the impact of the conflict in the Middle East.

[00:01:48] Rory Dowie: Can you give our listeners an update there and, and perhaps pull out anything that you thought was pertinent?

[00:01:53] James Athey: Yes, so as you say, the first look we've had at major Inflation data, post the outbreak of the war at the end of February.

[00:02:02] James Athey: So this was US Consumer Price Index, CPI, everybody I'm sure listening would expect certainly as markets and consensus was expecting a big jump in headline. So headline inflation, the main print that we will refer to, and one that includes the effect of oil and energy prices that went from 0.3% month on month last month to 0.9% so a kind of tripling of that monthly inflation rate.

[00:02:28] James Athey: In terms of the year on year measure, which probably means more to most people, actually, it was a little lower than expectations at 3.3%, but that's still nearly a full percentage point higher, than the print for February at 2.4%, so a jump in inflation as you would expect.

[00:02:46] James Athey: But the core data, which strips out the volatile components such as energy, that only increased by 0.1 percentage points to, 2.6% year over year, and it's that data which is going to be most important for central banks.

[00:03:04] James Athey: That's the bit that they will have a laser focus on because that's where we will see broader effects, not just the oil prices has gone up, but has that rise in the oil price meant other prices in the economy, firstly, other goods prices, but then service prices probably because of higher wages if they start to go up as well, that becomes a big concern for central banks. That's when they're likely to be increasing interest rates.

[00:03:33] James Athey: So no sign of that just yet, as you would expect, but that's what we'll be looking at as we go through this year.

[00:03:39] Rory Dowie: Yeah, and a couple of questions, James, I've actually read this week from some of our clients. Typically, when you get those, obviously first order spikes in kind of the headline numbers, with something like oil.

[00:03:48] Rory Dowie: Typically, is there a time lag between that then showing up in the second order effects within that core inflation number that you said?

[00:03:55] James Athey: There is unfortunately, as with a lot of economics, these things are variable. So there's no fixed timeline for those things to play out.

[00:04:06] James Athey: What we would say is the most important concern, should it arise, would be wages, because it's the relationship between prices and wages, which becomes the biggest problem for the economy, the biggest challenge for central banks.

[00:04:25] James Athey: Obviously, if prices go up and wages don't, people can afford less, and that means demand goes down and eventually that will bring inflation down.

[00:04:35] James Athey: So the inflation shock sows the seeds of its own demise.

[00:04:39] James Athey: But if wages respond. People can continue to demand as much or more than they did before and that relationship as wages or an input into prices themselves, because it's a cost for businesses, it becomes self-fulfilling.

[00:04:54] James Athey: And that's what can become really damaging to an economy, and central banks cannot allow that to take hold. So watching wages will be key, there's no fixed time horizon, but I certainly think you should not be expecting those wider second round effects until much later in the year, probably the mid to late summer.

[00:05:12] Rory Dowie: Brilliant, very clear, thank you, James.

[00:05:14] Rory Dowie: Changing tact somewhat, we've spoken a lot about the Middle East and inflation.

[00:05:17] Rory Dowie: Back to my favourite topic, AI, we had major news out of Anthropic, the creators of Claude. Essentially, they are what open AI is to chat GPT and Claude announced one of their new models, Claude Mythos.

[00:05:29] Rory Dowie: However, it hasn't yet been released to the public. In fact, it was too good to be released. Too intelligent to be released, and so much so that US Treasury Secretary Scott Bessant on Friday called business Leaders to discuss the development.

[00:05:41] Rory Dowie: And really there are a number of implications to that and we've obviously debated on the podcast over the past couple of years, you know, how do we monetise this huge capital expenditure by these companies that are investing in AI. And how are they getting returns on that capital expenditure?

[00:05:55] Rory Dowie: And one way they were doing that was obviously through releasing these models to the general public and charging them.

[00:06:01] Rory Dowie: James, from your perspective, are there any implications of this move and this AI model being too good to be released to the public and could you give a listeners a bit of a flavour of that?

[00:06:11] James Athey: Yeah, I mean, I'll try not to be too much of a bond investor about this. You know, we do have a reputation for being, you know, somewhat miserable.

[00:06:18] James Athey: But yeah, it's obviously the first thing to say, as you've already noted, is that it sounds like it's a fairly decent leap in the quality of the model, the quality of the output.

[00:06:27] James Athey: That, of course, is fantastic from Anthropics perspective, and for those that believe that there are really significant productivity gains to be had from AI will be looking at this and sort of licking their lips.

[00:06:39] James Athey: What stood out from my perspective though, were the security considerations. It sounds like this Mythos model being let loose on existing software, existing operating systems, it's been very quickly able to identify thousands of security holes in existing software.

[00:06:59] James Athey: That sort of process that hackers would engage in, that's been very manual in the past and the reason why we all have these constant software updates and patches that we have to instal on our computers. That's because these breaches are being found all the time.

[00:07:14] James Athey: For a system to be able to just go out there en masse and identify hundreds if not thousands of those breaches, that has to be a significant concern.

[00:07:23] James Athey: I guess on the flip side of that, if you are in the business of selling cybersecurity, potentially that means greater demand for your products going forward, provided they're robust against these intelligent AI models.

[00:07:36] James Athey: So you and I, Rory, have discussed all this stuff and it's really difficult to have a high conviction view, but I think as a lot of AI sort of proponents have been at pains to explain there are risks around this progress in AI and it's important that we understand those and manage them going forward.

[00:07:53] James Athey: And it does look like, in this case, anthropic has been suitably cautious about how they release this model, which I think has gotta be good news.

[00:08:00] Rory Dowie: Yeah, absolutely, but I guess it does beg the question clearly Anthropic are leading the race at the moment, but you know, other companies can't be too far behind.

[00:08:08] Rory Dowie: Even companies perhaps out of China could these things be weaponised, obviously remains to be seen and we'll keep an eye on that.

[00:08:14] Rory Dowie: Looking ahead for this week, we have first quarter earning season in the stock market, so companies will be reporting for the first three months of 2026, how they performed and kickoff with some of the financials companies this week so we'll give you an update on that next Monday.

[00:08:28] Rory Dowie: James as ever, thank you so much for joining.

[00:08:30] James Athey: My pleasure, Rory, good to be here again.

[00:08:32] Rory Dowie: Listeners, thanks as always for tuning in and as always, wishing you a great week ahead.