EARNINGS WATCH

From LSEG IBES:

48 companies in the S&P 500 Index have reported earnings for Q1 2026. Of these companies, 87.5% reported earnings above analyst expectations and 8.3% reported earnings below analyst expectations. In a typical quarter (since 1994), 67% of companies beat estimates and 20% miss estimates. Over the past four quarters, 78% of companies beat the estimates and 17% missed estimates.

In aggregate, companies are reporting earnings that are 8.8% above estimates, which compares to a long-term (since 1994) average surprise factor of 4.4% and the average surprise factor over the prior four quarters of 7.1%.

Of these companies, 79.2% reported revenue above analyst expectations and 20.8% reported revenue below analyst expectations. In a typical quarter (since 2002), 63% of companies beat estimates and 37% miss estimates. Over the past four quarters, 73% of companies beat the estimates and 27% missed estimates.

In aggregate, companies are reporting revenues that are 2.2% above estimates, which compares to a long-term (since 2002) average surprise factor of 1.3% and the average surprise factor over the prior four quarters of 1.9%.

The estimated earnings growth rate for the S&P 500 for 26Q1 is 14.4%. If the energy sector is excluded, the growth rate improves to 15.5%.

The estimated revenue growth rate for the S&P 500 for 26Q1 is 9.4%. If the energy sector is excluded, the growth rate improves to 9.9%.

The estimated earnings growth rate for the S&P 500 for 26Q2 is 20.4%. If the energy sector is excluded, the growth rate declines to 18.4%.

The 48 companies that have reported showed earnings up 32.1%! On revenues up 12.6%!

22 of the 48 were Financials and 11 consumer centric. Only 5 were Technology but they surprised by 20%. They account for 34.7% of the S&P 500 market cap.

Yet, as of Friday morning, overall Q1 estimated growth rates had not changed. Q2 total earnings growth rate rose from +19.2% to 20.4% but only because of Energy. Same for Q3 and Q4.

 

Trailing EPS are now $283.48. Full year 2026e: $325.18. Forward EPS: $340.96. Full year 2027e: $379.20.

From its March 30 low of 6316 to Friday’s close of 7100, the forward P/E rose from 18.5 to 20.8. It was 23.2 in October.

Note the sharp and unusual acceleration in forward EPS vs trailing EPS:

It seems that while analysts are boosting Energy and Materials earnings estimates on higher prices, they currently see no concomitant adverse effects on other sectors.

Sometimes the aggregates hide more subtle changes as Bloomberg reports:

Just one week into earnings season, outlooks are planting red flags. More analysts have been cutting their profit estimates than raising them. And the proportion of companies raising both earnings and sales outlooks has been declining simultaneously, according to 22V Research. The pattern has occurred “during periods of significant shifts in guidance,” including the financial crisis in 2008 and the pandemic period in 2021, according to 22V. Both periods were preceded by brutal bear markets. (…)

Already, 40 companies in the S&P 500 Index have lowered their quarterly views, the highest level since the second quarter of 2025 at the onset of tariffs, data compiled by Bloomberg Intelligence show. BI described guidance momentum as “weaker” now than it was in the final quarter of 2025.

Investors are already punishing firms that have reduced forecasts. Abbott Laboratories fell to the lowest level since 2023 after cutting its profit guidance on Thursday. JPMorgan Chase & Co. slipped after lowering its net interest income outlook Tuesday. And Netflix Inc. plunged on Friday after giving a lackluster second-quarter estimate.

In each case, outlooks overshadowed first-quarter results that beat expectations. (…)

Companies that have withdrawn outlooks altogether are being punished even more. Consider Canadian recreational vehicle maker BRP Inc., which pulled forecast Wednesday as a result of changes to US tariff policy, and saw its shares plunge 35% in Toronto. French train maker Alstom SA saw its shares plunge as much as 36% on Friday after retracting its own guidance.

Unsurprisingly, analysts are reacting, though only trimming down, for now:

A lower P/E divided by an unchanged growth rate gives a lower PEG ratio, currently 1.07 vs a long-term average of 1.32.

A PEG of 1.07 is clearly historically low. But is it really cheap?

Yardeni’s PEG chart divides the forward P/E by the 5-year forward consensus expected annual earnings growth rate (20.8/19.4e = 1.07).

This chart plots the LTEG since 1985 …

… this other chart plots S&P 500 EPS against nominal GDP …

… and this chart shows the historical EPS CAGR for the S&P 500.

Better not put too many chips on this 1.07 PEG ratio slot unless you really think the economy will produce such long-term earnings explosion.

While considering long periods, Apollo management offers this chart:

Back to the shorter term, Goldman Sachs

said the gains, like the bullish earnings revisions, weren’t broad-based. The team’s preferred measure of market breadth has dropped to its lowest levels in recent decades, aside from the Dot Com bubble and mid-2023. (…)

Goldman projects S&P 500 EPS growth of 12% this year, broadly in line with top-down strategist consensus views, but below the 18% bottom-up consensus forecast. Risks are two-sided and skewed to the upside, the strategists wrote. Downside threats are to weaker consumer demand and higher input costs linked to the war, and potential positives are tied to AI investment and productivity growth.

• Short Squeeze Turbocharges Equity Rally as Riskiest Stocks Soar

Investors could point to any number of reasons behind the stock market’s neck-breaking rally. A rapid unwind in bearish wagers gone wrong should be near the top of the list.

A Goldman Sachs Group Inc. basket of the most-shorted stocks jumped more than 13% this week, as traders rushed to close out positions in sectors like financials and industrials. The basket outperformed the S&P 500 Index by 9 percentage points, clocking its best week since 2023. (…)

“We are seeing short covering across all sectors,” said Ihor Dusaniwsky, managing director and head of predictive analytics at S3 Partners LLC. “Especially the shorts that bought near the recent lows in anticipation of a continued momentum move downward,” he added. (…)

A UBS Group AG basket of 100 stocks with low scores on measures including financial health or efficiency — names like GameStop Corp. — jumped 9% this week, microcaps added 7% and profitless tech firms soared 14%.

“This risk is that investors mistake this charge to all-time highs as a general, all-clear, buy everything signal,” said said Mark Malek, chief investment officer at Siebert Financial. (…)

It’s Getting Harder to Tell Investing From Gambling, and It’s Not Your Fault When the stock market seems unstoppable, it’s easy to step over the line

A kind of gambling fever seems to be setting in. In February and March, asset managers filed to launch dozens of exchange-traded funds that would seek to quadruple or even quintuple the daily returns on stocks and other assets, even though regulators have reportedly indicated they might not be approved. On prediction markets, you can bet whether the price of bitcoin will go up or down in the next five to 15 minutes—24 hours a day.

These investment building blocks—and the seemingly unstoppable rise of the stock market—have made making money feel effortless.

The younger you are, the more influence those recent returns will have on you—because you haven’t been investing long enough to have experienced markets that go down and don’t bounce right back up.

Ulrike Malmendier, an economist at the University of California, Berkeley, has found that one of the biggest factors in your expectations of future returns is whether you’ve lived mainly in a time of rising, falling or stagnating stock markets.

As investors, we are all prisoners of our past, especially the recent past. But you need to recognize that fact, so you become aware of how it can skew your decisions.

Meanwhile, we’re all trying to navigate (!) through what has become a war of declarations. Gosh, we don’t even know any more who’s closing the Strait to who.

Last Friday:

Only President Trump, not Iran, determines who negotiates on behalf of the United States,” said White House spokeswoman Anna Kelly. “We will not negotiate through the press, and anything not announced by President Trump or the White House should be considered speculation.

Also last Friday:

His bold declarations are part of his negotiating strategy, administration officials said, aimed at jolting negotiators into action and ratcheting up pressure on Iran to agree to a final deal.

Also last Friday:

Later on Friday, when speaking with reporters, Trump played down the differences between the U.S. and Iran. “If there are, we’ll have to straighten it out, but I don’t think there’s too many significant differences,” Trump said.

But:

Iranian state media reported on Sunday night that Iran would not join the peace talks, with the country’s official news agency, IRNA, writing that the country’s decision to stay away “stems from what it called Washington’s excessive demands, unrealistic expectations, constant shifts in stance, repeated contradictions, and the ongoing naval blockade, which it considers a breach of the ceasefire”. (…)

What matters is that clarifications were issued by the Iranian foreign ministry on Friday and the leader of Iran’s delegation to Islamabad, Mohammad-Bagher Ghalibaf, in a TV interview on Saturday. Ghalibaf accused Trump of telling lies, but said the door to diplomacy was not closed. Once it became clear Trump was not lifting the blockade, Iran said on Saturday that the strait was fully closed again and the brief conditional reopening had ended.

Trump on Sunday could have responded by insisting no further negotiations with Iran were possible. He could have claimed Iran was shooting at European ships in total violation of the ceasefire.

Instead, with the strait in effect closed, Trump clearly examined his array of bad options and decided to try diplomacy again. The sense of unbridled chaos inside the White House was only underlined by a flurry of conflicting reports as to whether the vice-president, JD Vance, was to attend, and the according implications for the Iranian delegation, including the presence of Ghalibaf. (…)

By the end of the day, the Iranian Fars news agency reported that “the ministry of foreign affairs and the supreme national security council have decided to continue the policy of silence in the face of news-making by foreign media”.

The sense that a similarly Quiet American in the White House may speed the path to peace was overwhelming. (The Guardian)

Last week, the WSJ headlined: Trump Bets Economic Pain Will Finally Force Iran to Reopen Strait

Today:

U.A.E. Asks U.S. About a Wartime Financial Lifeline

The United Arab Emirates has opened talks with the U.S. about obtaining a financial backstop in case the Iran war plunges the oil-rich Persian Gulf state into a deeper crisis, U.S. officials said.

U.A.E. Central Bank Gov. Khaled Mohamed Balama raised the idea of a currency-swap line with Treasury Secretary Scott Bessent and Treasury and Federal Reserve officials in meetings in Washington last week, the officials said. The Emiratis emphasized that they had so far avoided the worst economic effects of the conflict but might still need a financial lifeline, the officials said.

The talks highlighted the U.A.E.’s concern that the war could inflict major damage on its economy and its position as a global financial hub, depleting its foreign reserves and scaring away investors who once saw it as a stable and secure place for their money. The conflict has damaged Emirati oil-and-gas infrastructure and shut off their ability to sell oil using tankers transiting the Strait of Hormuz, depriving it of a key source of dollar revenues.

Emirati officials haven’t made a formal request for a swap line, which would give the U.A.E. central bank inexpensive access to dollars to support its currency or shore up its foreign reserves in case of a liquidity crisis. In talks with the U.S. in recent days, they have portrayed the proposal as preliminary and precautionary, the U.S. officials said.

But they have also argued that it was President Trump’s decision to attack Iran that entangled their country in a destructive conflict whose effects may not be over, some of the officials said. Emirati officials told the U.S. officials that if the U.A.E. runs short of dollars, it may be forced to use Chinese yuan or other countries’ currencies for oil sales and other transactions, some of the officials said.

In that scenario is an implicit threat to the U.S. dollar, which reigns supreme among global currencies partially because of its near-exclusive use in oil transactions. (…)

The Treasury Department has recently provided alternative swap arrangements without the Fed. The department signed off on a $20 billion swap for Argentina through the Exchange Stabilization Fund last year. (…)

The Emirati dirham is pegged to the dollar and backed by foreign-currency reserves of $270 billion, but the war has put it under pressures from capital-flight risks, stock-market volatility and other disruptions, analysts said. (…)

The U.A.E. has threatened to freeze billions of dollars of Iranian assets held in the Gulf state, The Wall Street Journal has reported, a move that could sever one of Tehran’s most important economic lifelines. But such a move would also upend lucrative trade and banking ties with Tehran and damage the U.A.E.’s ability to attract and retain capital from other politically charged sources, such as Russia. (…)

Biggest US Banks Are Shaking Off Private Credit Fears

(…) “It’s an area that we feel is important to some of our big relationships,” [Citizens Financial Group Inc.’s CEO] Van Saun said. And the bank’s goal is to “cement that relationship and do a lot of other business.” (…)

Each lender measured it slightly differently, but the total points to more than $185 billion, with nearly 20% of that coming from regional banks. With investors and regulators still on edge about how weakness in the private credit market could spillover into the traditional financial system, executives spent much of the week trying to allay those fears.

“It’s hard to envision losses on this book,” U.S. Bancorp Chief Financial Officer John Stern said in an interview. (…)

A situation that would provoke losses on its private-credit portfolio would be extreme, Stern said.

“If we start taking losses on this sort of thing, then there are other things to worry about,” Stern said.

Executives said that the bar is high for the pressure in private credit to come and bite banks. They typically sit at the top of the capital stack, meaning losses would have to wipe out equity and junior debt before hitting banks, executives said. (…)

“We see higher default rates that are creeping up in that space [speculative-grade credit broadly],” he said. “The news is, ‘Hey, are there weaker credit structures out there in the face of an economy that might be getting weaker?’ If that’s the case, then I think you’ll see credit losses be greater than what some people are assuming right now.”

Banks are spotting opportunities to also step in as some private-credit firms pull back. Some of those nonbank lenders are grappling with redemptions, particularly with retail funds, causing them to pull back on lending, bank executives said. That’s opening up some potential for depository institutions to step back in for those borrowers. (…)

In another Bloomberg article:

(…) Time is running out for private capital firms to tackle under-pressure investments, with as much as $770 billion of loans to US companies already in troubled territory, according to Suzy Gibbons, partner and head of research at Davidson Kempner.

Despite the massive attention on private credit’s outsized software bets, Gibbons said problems in leveraged credit could be traced to a much wider range of industries, where significant volumes of so-called soft defaults would likely mutate into hard defaults in the not-too-distant future.

There’s a greater level of recognition that private equity owners aren’t going to get saved by lower rates, she said on Thursday’s Credit Edge podcast. “In many instances there just is not a path to equity value. It makes sense at that point for the owners to hand the keys over to the creditors.” (…)

Like Adams Street’s Diehl, Gibbons said basic fundamental credit analysis — including changes in leverage versus earnings and interest coverage ratios — told a more sobering story than published default rates that can sometimes misrepresent the scale of borrowers’ woes.

By slicing the market on those parameters, Gibbons suggested that about a third of the direct lending market is “stressed,” she told my colleagues James Crombie and David Havens.

“That equates to $770 billion, which is a huge number in percentage terms. It’s actually double what it was back at the end of 2019,” she added, and could be more like 40% of the market if solely based on the loans to companies that exceed 7x earnings.

While an acute crisis was unlikely, Gibbons said opportunistic investors are poised for a material surge in dealmaking when losses start to sting. “A lot of those lenders aren’t going to want to shepherd companies through restructurings. They don’t have the operational teams in house,” she said.

Gibbons said she had “no reason” to think that recovery rates in the direct lending market would be any stronger than those seen in the leveraged loan market, where average recovery rates plunged to 36 cents in 2025 from around 60 cents a decade ago.

“I do think that where there are problems that emerge, people will probably be surprised by the losses being higher than anticipated,” she said. “People often look to prior cycles to inform current cycles and this cycle is fundamentally different because the starting leverage is higher than prior credit cycles.”

Direct lenders with exposures to smaller companies, or firms that have already conducted liability management exercises on loans, should be on high alert given technological disruption and macroeconomic uncertainty, Gibbons said.

A paper published by Harvard Law School in February studied 89 LMEs over the last decade and found that fewer than half of the firms avoided bankruptcy or re-default within a year; and only 22% avoided both within two years. (…)

This is happening in a strong economy with real fed funds rate (0.8%) below pre-GFC levels and declining…

…and with LT rates stable since 2003 and lower than nominal GDP growth rate.

DEAL OR NO DEAL?

China Calls On Swiss Firms to Step Up Investment, Cooperation

China Vice Commerce Minister Ling Ji urged Swiss companies to increase investment and cooperation with the Asian nation, highlighting opportunities under its 15th Five‑Year Plan.

Ling told executives at a roundtable in Bern, Switzerland, from firms including Nestle SA, UBS AG, Novartis AG and Glencore Plc that China’s policy direction would offer stability and certainty amid global economic turbulence, according to a statement on the ministry’s website on Saturday.

He encouraged Swiss comapnies to align their strengths in pharmaceuticals, advanced manufacturing, finance and research with China’s supply chains, innovation ecosystem and talent base, the ministry statement said.

During the meeting, Chinese officials addressed Swiss companies’ concerns including government procurement, the local production of innovative medicines, export controls, intellectual property protection,and supply chain security, according to the statement.

Abu Dhabi Funds Plan China Strategy Rejig to Boost Investments

Abu Dhabi is considering plans to consolidate Chinese assets housed within two of its wealth funds under a new entity, setting the stage for a radical overhaul of its investment strategy for the world’s second-largest economy. (…)

This would help avoid multiple Abu Dhabi vehicles competing for the same deals as the emirate looks to boost its exposure to China, the people said, declining to be identified discussing confidential information. (…)

Such a move would bring a critical economic relationship under the ambit of two influential names within Abu Dhabi’s circles of money and power. (…)

Abu Dhabi, home to about $1.8 trillion in sovereign wealth, has emerged as one of the world’s most consequential investors in recent years. Its funds — which also include the Abu Dhabi Investment Authority — have historically skewed toward the US and Europe. (…)

China Opens $70 Billion Dairy Market Access to Romanian Makers

China has approved imports of dairy products from Romania, the General Administration of Customs said in a statement Saturday.

The move allows qualifying Romanian producers to ship a wide range of milk and dairy items — including cheese, milk powder, whey products and infant formula — made from cow, sheep or goat milk that meet Chinese food safety standards, according to the statement. (…)

China and Romania signed an agricultural cooperation memorandum on March 17 that supports expanded trade in farm products, according to China’s agriculture ministry. Revenue for China’s dairy companies stood at 510 billion yuan ($71 billion) in 2024, according to the Dairy Association of China.

FYI: China has historically been the third-largest export market for U.S. dairy, behind Mexico and Canada. But the export environment has shifted significantly due to a series of retaliatory tariffs. Starting in early 2025, China imposed retaliatory tariffs on American farm goods, with rates on dairy reaching between 84% and 125% by mid-April 2025.

China Clean Tech Exports Jump Amid Global Energy Disruption

China’s exports of clean technology climbed in March, reinforcing signs that manufacturers are benefiting from rising global demand for alternative energy sources as traditional supplies are roiled by the Iran war.

The most notable growth came in shipments of lithium-ion batteries and electric vehicles, with an annual increase of 34% and 53%, according to data released by China’s General Administration of Customs on Saturday. Solar cells also saw 80% growth last month. All three exports rose from February levels as well.

The data give the first comprehensive picture of China’s clean tech exports since the US and Israel launched attacks against Iran seven weeks ago, effectively shutting the Strait of Hormuz and sparking a global energy crisis. The disruptions caused by the conflict have heightened the issue of energy security for countries reliant on fuel imports and sent consumers and industries hunting for alternatives.

“This is just the beginning, the knock-on effects of high energy prices will be unfolding for months to come,” said Euan Graham, senior analyst at UK-based think tank Ember. “Clean technologies are an escape from soaring fuel costs for consumers and a long term route for countries to reduce fossil fuel reliance. China is well positioned to meet this growing demand.” (…)

Years of capacity-building, often at the expense of profitability, have enabled Chinese manufacturers to scale up distribution in overseas markets quickly and competitively, making green products a new growth driver for the country’s exports. (…)

Dealerships across Asian capitals have reported an influx of customers pivoting to EVs as they try to avoid fuel prices that have soared since the start of the war.

“Chinese automakers can quickly increase their global reach during the Strait of Hormuz crisis,” secretary general of the China Passenger Car Association, Cui Dongshu, said during a briefing last week. (…)

Lutnick Shuts Down Talk of Any Chinese Investment in US Autos

Commerce Secretary Howard Lutnick ruled out the possibility of Chinese investment in the US auto industry, saying there’s no need for companies like electric carmaker BYD Co. in America.

When asked during a fireside chat at a Semafor event in Washington on Friday whether a joint-venture factory by BYD was on the table, the commerce secretary gave a one-word answer — “no” — drawing laughter from the audience.

Lutnick later elaborated on the sidelines of the same event, noting the moderator’s question had specifically mentioned BYD. “We’re not going to have them here,” he told Bloomberg News.

When pressed on the possibility of other Chinese companies investing in the US, the commerce secretary said, “Not cars, not cars.” (…)

And last week, Greer made similar comments to Lutnick’s, saying restrictions on foreign technology will likely keep Chinese carmakers out of the US for the foreseeable future.

US automakers have also been warning about Chinese cars in the run-up to the Trump-Xi meeting. Leaders of five US auto industry groups wrote in a March letter that Beijing’s efforts to “dominate” the global auto industry and gain access to the US “pose a direct threat to America’s global competitiveness, national security, and automotive industrial base.”

Still, Trump has said he’s open to the prospect of investments by the Asian nation in the American car industry. Speaking earlier this year in Detroit, he said that if Chinese automakers wanted to build plants in the US, he would “love that.”

So, what’s the plan?

US Weighs Tougher Auto Import Rules to Accelerate Reshoring

The Trump administration is considering potential changes to North American trade rules that would raise tariff costs on US automobile imports and push manufacturers to boost domestic production, according to people familiar with the matter.

US officials have discussed requiring vehicle imports to have a minimum amount of US parts, said the people, who asked not to be identified discussing the private deliberations.

Another option under consideration would limit the ability of automakers to lower their tariff rates under the US-Mexico-Canada free trade agreement, effectively raising the costs to bring vehicles across the border, one of the people said. The considerations are at an early stage and it isn’t immediately clear how that might work in practice. (…)

The considerations reflect frustration in Washington that trade policies have yet to produce a substantial reshoring of automobile and component factories to the US. President Donald Trump imposed a wave of tariffs last year to push companies to build more domestically, including a 25% tariff on imported vehicles and auto parts. (…)

The US remains heavily reliant on imports to satisfy domestic demand, particularly for vehicles starting at $30,000 or less. (…)

FYI: Cox Automotive data indicates that, if you were to pick up a brand new ride in early 2017 (Trump’s first inauguration), the MSRP attached would rest at an average of $34,986, all classes, makes and models considered. For early 2025, that figure increased to $48,039.

NEW-VEHICLE AVERAGE TRANSACTION PRICE

A 2025 report by cars.com compared the average new car price by country of final assembly. Cars assembled in the U.S. have an average price of roughly $53,000, higher than any other country. Cars assembled in Canada have an average price of $46,000; and cars assembled in Mexico have an average price of $40,000.

Only three sub-$30,000 models are currently built in the U.S..

Several structural factors explain why manufacturing costs run higher in domestic plants. First, American labor standards and wages exceed those in Mexico, Canada, and especially China. Second, U.S. facilities must comply with stricter environmental and safety regulations. Third, the domestic supply chain infrastructure has become fragmented, with many component suppliers operating at reduced capacity.

(…) even the most affordable vehicles Americans can buy incorporate significant international manufacturing content. The cost to manufacture and deliver these budget models is so tight in domestic facilities that automakers have largely abandoned this segment domestically. (…)

The current tariff environment adds another layer of complexity. While tariffs theoretically should incentivize domestic manufacturing expansion, Greene is skeptical about short-term price benefits. (…)

The reason is straightforward: scaling up U.S. manufacturing requires massive capital investment—constructing new factories, recruiting and training workforce, and rebuilding supply chains. “These investments demand significant time and resources,” Greene explains. “Automakers won’t absorb these costs themselves. Instead, they’ll pass them directly to consumers, meaning prices will likely climb before they ever descend.”

According to Cars.com’s latest Industry Insights Report, more than half of all U.S.-manufactured vehicles contain substantial imported components. This means the cost to manufacture American cars inherently depends on global supply networks—any tariff-related cost increase inevitably flows through to domestic producers as well. (gate.com)

The WSJ on April 16, 2026:

After President Trump’s auto tariffs took effect a year ago, General Motors pledged about $5 billion in new U.S. investments to boost domestic production to more than two million vehicles a year. Chief Executive Mary Barra has praised Trump’s levies as a tool to level the playing field.

But the tariff math still works for GM to build plenty of vehicles halfway around the world in South Korea.

The biggest U.S. automaker by sales volume has greenlighted roughly $600 million in new investments to bring Korean production back to full capacity of nearly half a million vehicles. Roughly 90% of the Chevrolet and Buick subcompact sport-utility vehicles made in South Korea get exported to the U.S., analysts say.

The current 15% U.S. tariff on South Korean autos alone adds roughly $2,000 to the cost of each vehicle, according to HSBC estimates. That is a considerable hit because the base models of these vehicles start at around $22,000 to $32,000 in the U.S. and margins tend to be slim.

Yet GM’s doubling down on South Korea shows that it still can be cost-effective to manufacture overseas in the era of Trump’s tariffs. GM Korea directly employs roughly 12,000 workers and operates three factories in the country.

Companies such as GM are factoring in the sunk costs of existing infrastructure, established supply chains and a trained labor force that costs less, said Mike Tyndall, a senior global autos analyst at HSBC.

“It’s pure economics,” Tyndall said. (…)

The economics of production in South Korea still hold up for GM because some costs are lower and because U.S. factories can’t easily be repurposed for the smaller, entry-level Korean-made models.

GM’s factories in the U.S. and Mexico are generally designed for larger vehicles. To move production to the U.S., an automaker like GM would often need to retool an existing American factory or build a new plant altogether.

Setting up the new production and getting the supply chain in order would likely require upfront investments of $1 billion to $3 billion, said Henner Lehne, who oversees global vehicle sales and production forecasts at S&P Global Mobility. Building a new plant typically takes two to four years plus another six to 12 months to increase to full capacity, he said.

Those starting costs alone translate to roughly $1,500 to $3,000 per vehicle in additional costs—similar to the amount of Trump’s tariffs on the smaller Korean-made vehicles.

In addition, U.S. labor and overhead costs tend to be higher. S&P’s Lehne estimates auto workers in the U.S. may earn $30 to $40 an hour, or up to $60 an hour for some members of the United Auto Workers union. In South Korea, an auto worker’s hourly wages, including base pay and bonuses, could range from $20 to $30. (…)

Even more interesting from Oliver Wyman:

A critical metric in this environment is labor cost per vehicle, which encompasses wages and productivity and provides insight into an automaker’s overall efficiency, competitiveness, and profitability.

Our “Harbour Report” team has conducted a comprehensive analysis of labor costs per vehicle across over 250 vehicle assembly plants globally, including a review and incorporation of sourcing strategies. Labor typically constitutes 65% to 70% of total conversion costs, requiring it to be a key focus area for automakers. The report also emphasizes the need to understand overall conversion costs, which include direct and indirect labor, overhead (rent, energy, and maintenance), and depreciation.

(…) The third archetype, mainstream model manufacturers, has an average labor cost of $880 per vehicle and includes traditional high-volume automakers from various countries. Japanese manufacturers enjoy lower labor costs per vehicle, with an average of $769, compared with manufacturers in the United States, where the average is $1,341 — a labor cost per vehicle that reflects recent historic union gains.

The fourth archetype, Chinese car manufacturers, has an average labor cost of $585 per vehicle, characterized by low wages and high efficiency. The group maintains the lowest overall conversion costs in the industry by leveraging its newer factories, efficient supply chains, and high production volumes. (…)

Several variables impact labor costs, including design complexity, which is reflected in engineered hours per vehicle (EHPV). Chinese manufacturers have optimized their processes to require significantly fewer engineered hours, resulting in lower production costs.

It’s pure economics, and logistics… and market savviness… and government leadership:

Japan’s mighty carmakers are in serious trouble They will need bold thinking to survive

Mibe Toshihiro, Honda CEO: “The Japanese automotive industry itself is on the brink of survival.”

He was hardly exaggerating. Nissan, once the sixth-largest carmaker in the world by sales, is entering the second year of a brutal restructuring, with seven factory closures planned by 2028. A 25% tariff on cars imported into America has bitten into the industry’s profits.

Yet it is the blistering rise of Chinese competitors that has hit hardest. In 2019 Japanese carmakers accounted for 31% of sales globally; by last year their share had fallen to 26%. The shock has been greatest in Asia. In China itself, sales of Japanese cars have slumped by a third since 2019. In South-East Asia, once a stronghold, their share of the market was 57% in 2025, down from 68% just two years earlier.

Japanese carmakers once seemed unstoppable. How did it go so wrong for them?

The heart of the problem is that, even more so than their Western counterparts, Japanese carmakers have struggled with electrification. Many have been sceptical of the staying power of electric vehicles (EVs), which account for a vanishingly small share of their sales.

Conventional petrol vehicles make up more than half of sales for all Japanese carmakers; at beleaguered Nissan it is 80%. Rather than plug-in cars, most have opted instead to emphasise conventional hybrids, which rely on the engine and regenerative braking to power the battery, as the assembly of these fits more easily into a production line built for internal-combustion engines.

Japan’s carmakers have expressed interest in alternative technologies such as hydrogen-powered cars for much the same reason. (…)

Sales of EVs, including plug-in hybrids, accounted for 26% of the global car market last year, up from just 3% in 2019. The pace of adoption has been especially brisk in Japan’s own neighbourhood: a third of cars sold in Asia are now EVs. It is not just China where they have taken off. In Singapore, 45% of car registrations last year were EVs. In Thailand, where Japanese carmakers have had supply-chains in place as far back as the 1960s, the share is 20% and rising. (…)

The trouble is that making EVs—which are, in effect, computers on wheels that rely far more on software than complicated hardware—does not play to Japan’s traditional strength in mechanical engineering. (…)

According to Bernstein, a broker, the industry’s per unit fixed costs—including research and development and the depreciation of equipment—are 78% higher than they were a decade ago. Rising wages and inflexible employment laws in Japan have made it difficult to keep costs under control.

The one exception to all this gloom is Toyota, the world’s biggest carmaker by both sales and net profit. Its position as the global leader in conventional hybrids, in which it holds a 40% market share, has meant it has benefited from the revocation of subsidies for EVs in America under President Donald Trump.

Although its chairman, Toyoda Akio, has expressed doubt about the potential scale of demand for EVs, the company has launched several of them exclusively for China, which it has developed in partnership with local firms including BYD and Huawei.

That has provided valuable lessons. Alone among Japanese carmakers (and most Western ones), Toyota has managed to maintain a stable market share in China, where it accounts for 6% of sales (BYD, the market leader, holds 13%). An expanded global EV line-up is expected by 2027. (…)

America is falling behind in the global EV race – that’s going to cost the US auto industry

At the 2026 Detroit Auto Show, the spotlight quietly shifted. Electric vehicles, once framed as the inevitable future of the industry, were no longer the centerpiece. Instead, automakers emphasized hybrids, updated gasoline models and incremental efficiency improvements.

The show, held in January, reflected an industry recalibration happening in real time: Ford and General Motors had recently announced US$19.5 billion and $6 billion in EV-related write-downs, respectively, reflecting the losses they expect as they unwind or delay parts of their electric vehicle plans.

The message from Detroit was unmistakable: The United States is pulling back from a transition that much of the world is accelerating. (…)

That means the U.S. pullback on EV production is not simply a climate problem – gasoline-powered vehicles are a major contributor to climate change – it is also an industrial competitiveness problem, with direct implications for the future of U.S. automakers, suppliers and autoworkers. Slower EV production and slower adoption in the U.S. can keep prices higher, delay improvements in batteries and software, and increase the risk that the next generation of automotive value creation will happen elsewhere. (…)

The U.S. risks becoming a follower in the industry it once defined.

Some people argue that American consumers simply prefer trucks and hybrids. Others point to Chinese subsidies and overcapacity as distortions that justify U.S. industry caution. These concerns deserve consideration, but they do not outweigh the fundamental fact that, globally, the EV share of auto sales continues to rise.

For U.S. automakers and workers to compete in this market, the government, in our view, will have to stop treating EVs as an ideological matter and start governing it like an industrial transition. (…)

The scene at the Detroit Auto Show should be a warning, not a verdict. The global auto industry is accelerating its EV transition. The question for the United States is whether it will shape that future – and ensure the technologies and jobs of the next automotive era are in the U.S. – or import it.

Now, here’s how to make a quick deal:

Joe Rogan, who endorsed President Trump in 2024 but has recently been critical, popped into the Oval Office yesterday as the president signed an executive order to speed reviews of certain psychedelic drugs, including ibogaine, to help treat serious mental illness.

A tieless Rogan, standing behind Trump, said:

“I want to tell everybody how this happened. I sent President Trump some information: We have a gigantic opiate problem in this country … With one dose of ibogaine, more than 80% of people are free of that addiction. … The text message came back: ‘Sounds great. Do you want FDA approval? Let’s do it.’ It was literally that quick.” (Axios)

IMF Sees Canada’s Fiscal Position as Strongest in Group of Seven

Finance Minister Francois-Philippe Champagne will release a mini-budget outlining the country’s finances on April 28. The government has estimated a C$65.4 billion ($48 billion) deficit for the current fiscal year, as Carney aims to spend heavily on defense and infrastructure while cutting taxes. In the November budget, the government said the outlays would push its net debt-to-gross domestic product ratio to 43%.

By that metric, Canada has a stronger financial position than other G-7 countries, many of which carry net debt levels near or above 100% of the size of their economies. That dynamic has at times led economists to describe Canada as simply the “cleanest dirty shirt.”

Still, Chalk reiterated the IMF’s view that the northern nation has room to spend more to boost the productive capacity of the economy and to build out infrastructure that supports the growth of its energy sector and other strategic industries. (…)

Chalk also praised some of Carney’s changes to Canada’s tax framework — including expanding write-offs for capital expenditures — calling it “quite competitive internationally,” especially at the corporate level.

“The environment to invest in Canada is very persuasive,” he said, though he added that case would be strengthened if the uncertainty posed by US tariffs went away. (…)

The IMF also sees Canada’s economy growing 1.5% in 2026, higher than the 1.1% estimate in a Bloomberg survey of economists. That’s the second-fastest pace of growth among advanced countries, after the US.

“Sometimes I find Canadians don’t actually realize how good they have it,” Chalk said.

They do, more and more …

• Want to be a Canadian? It’s never been easier. Pledging allegiance to ice hockey, Celine Dion and poutine has just become easier for U.S. citizens.

(…) Jacqueline Rose Bart, managing partner and a certified immigration law specialist with Bartlaw LLP in Toronto, said inquiries increased when President Donald Trump was first elected in 2016, spiked after he was reelected in 2024 and rose again in December, when the government loosened its citizenship rules. She said 95 percent of her firm’s clients applying for citizenship under the new law are U.S. nationals or citizens.

“This time, it’s been absolutely insane,” Bart said. “It’s been nonstop on immigration, and now with citizenship, it’s been nonstop with citizenship.” (…)

The government agency, which posts the estimated processing time online, also shares the number of people awaiting a decision — 56,300 on April 7.

Eligible adults can apply online for 75 Canadian dollars (about $50). (…)

You’re welcome!

Trump Bets Economic Pain Will Finally Force Iran to Reopen Strait The administration hopes pressure on Iran’s oil industry will increase the longer the blockade endures

(…) U.S. officials said Thursday that the blockade, initially focused on ships headed to and from Iranian ports, would expand to cover all so-called shadow-fleet vessels that serve Iran’s oil exports. The Pentagon said it was prepared to board those ships wherever they are in the world. (…)

In as little as two to three weeks, Iran could hit a moment known in industry parlance as reaching “tank tops”—essentially running out of room to store the oil it is pumping out of the ground—according to Vortexa, Kpler and Energy Aspects, which track the industry.

Data on the exact size of Tehran’s oil facilities is opaque, and other analysts have suggested Iran could have more flexibility.

Iran’s response to the blockade has so far been muted. It is possible that Tehran feels it can absorb the pain of a prolonged oil shutdown, just as it withstood the military assault and the killings of its top leaders. (…)

Under what the administration calls Economic Fury—an echo of the broader Operation Epic Fury—the Treasury Department said this week that it wouldn’t renew a short-term oil waiver allowing the sale of sanctioned Iranian oil expiring Sunday.

The department also targeted an illicit oil-smuggling network run by Iran’s elite, sanctioning more than two dozen people, companies and vessels. The Treasury threatened sanctions against global banks aiding Tehran.

The U.S. blockade applies to “all ships, regardless of nationality, heading into or from Iranian ports,” Gen. Dan Caine, chairman of the Joint Chiefs, said Thursday. The operation would pursue any Iranian-flagged vessel or any vessel attempting to provide material support to Iran, he said. (…)

Tankers that make it through the blockade can still be loaded, even if they remain trapped in the Gulf, stretching Iran’s tank-tops deadline. Satellite imagery showed three tankers capable of carrying 5 million barrels of oil loading on Kharg Island, Iran’s oil export hub, according to TankerTrackers.com, a research firm.

Iran also has roughly 160 million barrels of Iranian oil already loaded on tankers at sea, Vortexa estimates. Some of it floats outside the Gulf near buyers in Asia, allowing Iran to sell oil for weeks even if it starts cutting production. (…)

Iranian onshore storage—with a capacity of up to 120 million barrels—is currently over half full. At current export rates, that space would be exhausted in less than three weeks, Bronze said.

If those tanks top out, Tehran will be forced to shut in active wells—a drastic measure risking permanent infrastructure damage. (…)

Windward:

U.S. Central Command has confirmed that at least eight Iran-linked oil tankers have been intercepted since the start of the blockade. In each case, vessels were contacted via radio and instructed to reverse course, with full compliance and no need for boarding actions.

The blockade is being enforced against vessels of all nationalities entering or departing Iranian ports, with U.S. forces maintaining maritime superiority and actively monitoring compliance. More than 15 warships and additional personnel have been deployed to support enforcement.

This confirms that the blockade is operational rather than decelerative, with early-stage enforcement already altering vessel behavior without escalation.

Iranian oil exports remain structurally active, despite the enforcement environment.

As of April 15, approximately 153.7 million barrels of Iranian oil are on the water, with 84.9% destined for China. Average daily export volumes from Kharg Island between February and April remain elevated at approximately 2.04 million barrels per day.

Satellite and AIS analysis confirms at least two VLCC departures from Kharg Island immediately surrounding the start of the blockade. Two Iranian-flagged VLCCs, each loaded with approximately 2.01 million barrels, are bound for Dongjiakou, China.

These patterns confirm that Iranian export flows remain active, supported by both physical loading and deceptive shipping practices. (…)

These observations confirm continued reliance on dark operations, fraudulent flagging, and concentrated loading activity to sustain export flows. (…)

The operating environment is defined by active enforcement alongside ongoing evasion and selective continuation of maritime trade, with pressure building across both physical and financial domains.

But who’s economic pain?

• Imminent energy shortages in parts of the world and for the rest, significantly higher prices. The battle for the physical barrel has begun. (@ericnuttall)

• Europe could run out of jet fuel in 6 weeks, IEA warns

(…) “In April, there is nothing,” Birol said last month. “The loss of oil in April will be twice the loss of oil in March. On top of that you have LNG and others. It will come through to inflation, I think it will cut economic growth in many countries, especially emerging economies. In many countries the rationing of energy may be coming soon.” (…)

• Trump Says Iran Deal Getting Closer as Lebanon Truce Starts

(…) Trump said it may not be necessary to renew an April 7 truce with the Islamic Republic before it expires next week, defying expectations that an extension will be needed to allow more time for diplomacy.

“Iran wants to make a deal. They are willing to do things today that they weren’t willing to do two months ago,” the president told reporters on Thursday. “We have a very successful negotiation going on right now. If it happens, it will be announced fairly soon.”

Some leaders in Arab states in the Persian Gulf and Europe expect it will take about six months to agree to a peace accord and that the ceasefire should be extended to cover that period, according to officials familiar with the matter, who asked not to be identified discussing private talks. That’s in part to allow for a reopening of the critical Strait of Hormuz waterway, they said.

Iran has yet to comment on Trump’s claims that Tehran has made concessions, including over the key issue of its nuclear program. The US leader reiterated that the Islamic Republic “will not have nuclear weapons,” and pushed back against suggestions that a fixed-term moratorium on uranium enrichment is up for negotiation. (…)

“They’ve agreed to almost everything,” Trump said. “They got to get to the table with a pen.”

Comments from both Iranian and US officials on Thursday suggest the sides remain far apart on key issues, but the ceasefire with Lebanon could provide fresh momentum. Iran’s Parliament Speaker Mohammad Bagher Ghalibaf, who took part in the Pakistan talks, had earlier said a permanent ceasefire must cover the fighting in Lebanon.

The Middle East crisis has been ongoing for too long to leave no mark on the global economy

Too many essential raw materials have therefore been stuck in the Persian Gulf for too long for global growth not to be affected in some way. Starting with oil, whose production has been reduced by about 13 million barrels per day since the start of hostilities—the equivalent of about 15% of global production. Unsurprisingly, OPEC countries have been hit the hardest, recording a record drop in production in March.

While this decline certainly led to a rise in crude oil prices, the worst case scenario has not materialized—at least not yet. In fact, benchmark prices have even fallen in recent days. It should be noted, however, that the futures contracts most closely watched to track oil price movements do not necessarily reflect the full extent of current supply issues. Indeed, the significant backwardation currently characterizing oil markets forces buyers seeking immediate delivery to pay a premium over these futures contracts.

Combined with rising transportation costs, this spread has put pressure on refiners’ profitability, prompting many to cut production. This shortfall, exacerbated by a decline in production capacity in the Middle East itself—due to attacks on certain refining sites or a shortage of inputs—and by already low international inventory levels prior to the start of the conflict, has resulted in a much sharper rise in the price of refined products since the crisis began.

Several other raw materials, whose importance to the proper functioning of the global economy is far from negligible, also depend on the free flow of maritime traffic through the Strait of Hormuz. These include other energy products, such as natural gas; essential raw materials, such as helium and aluminum; fertilizers such as sulfur, ammonia, and urea; and petrochemicals indispensable for the manufacture of plastics, such as naphtha, polyethylene, polypropylene,
and methanol. Difficulties in supplying these products could eventually put upward pressure on consumer prices worldwide. (…)

Geographically speaking, Asian and European countries are likely to be hit hardest, given their heavy reliance on energy exports from the Middle East. (…)

Data centre delays threaten to choke AI expansion Almost 40% of such builds in US risk hold-ups, including projects tied to Microsoft and OpenAI

Delays to a swath of new US data centres threaten to slow the rollout of AI by the world’s biggest tech companies, with almost 40 per cent of all projects due this year at risk of falling behind schedule.

Major projects for Microsoft, OpenAI and other tech groups are likely to miss completion dates by more than three months, according to data shared with the FT by SynMax, a satellite and AI analytics group.

More than a dozen industry executives said campuses targeting hundreds of megawatts are being held up by permitting hurdles and chronic shortages of labour, power and equipment.

The bottlenecks are emerging as a key constraint on how quickly companies can turn vast spending on AI into revenue, raising concerns that billions in planned investment will take longer than expected to generate returns.

Hyperscalers are racing to build ever-larger data centres, pushing to bring facilities online that will draw at least 1 gigawatt of electricity — roughly a nuclear reactor’s output. (…)

OpenAI said: “Our historic data centre build-out is on schedule and we will accelerate from here. In partnership with Oracle, SB Energy and a broader ecosystem of partners, we are delivering rapid progress in Abilene, Shackelford County and Milam County in Texas.”

Oracle said: “Each data centre we’re developing for OpenAI is moving forward on time, and construction is proceeding according to plan.”

SB Energy said: “The Milam County Data Center is on schedule and on pace to be one of the fastest data centres of its kind ever delivered.” (…)

Satellite imagery shows land cleared for six planned facilities, but as of early April only one showed signs of development. SynMax estimates the earliest possible delivery date for the first building is December, while a timetable in line with most comparable projects would push it out to late 2027.

Other OpenAI-linked campuses also appear to be progressing slowly. In Milam County, Texas, where Greg Brockman last month said a 1.2GW site was “taking shape”, satellite imagery shows construction has begun on only one facility. Of the group’s major Texas projects, only one in Abilene is expected to complete this year. (…)

Two construction executives working on OpenAI-linked projects said there were not enough specialist workers, from electricians to pipe fitters, to meet demand across the build-out as companies race to construct clusters of increasingly large and complex facilities.

Strained grid capacity and shortages of equipment such as gas turbines and transformers are also causing delays. Remote locations are pushing labour costs up as much as 30 per cent, they added. (…)

Nebius said: “All capacity tranches under our agreement with Microsoft to date have been delivered on time, and we currently expect to deliver the remaining tranches on schedule. As of now we are not aware of issues that would materially affect this.”

Satellite imagery suggests the latest phases of the project are progressing more slowly, with structures in place but timelines slipping. Thermal imagery taken at the site indicates that equipment has yet to come online.

SynMax estimates more than 60 per cent of projects scheduled for next year have yet to begin construction, adding to concerns over delays to the industry’s expansion pipeline. (…)

FYI:

• “Weekly initial unemployment insurance claims continue to confirm that layoffs remain historically low. For the week ended April 11, they fell 11,000 to 207,000. Continuing claims edged up slightly to 1,818,000, but the four-week moving average declined to its lowest reading since June 2024, suggesting that hiring activity may actually be improving. That would not surprise us because corporate profits is at a record high. Profitable companies tend to increase their payrolls.” (Ed Yardeni)

China to Commission Seven Nuclear Reactors in 2026, CCTV Says

Seven nuclear power reactors are scheduled to be completed and commissioned in China this year, state broadcaster China Central Television reported, citing the nation’s atomic energy organization’s annual report.

China currently operates 60 commercial nuclear reactors, with 36 units under construction — including two that started this year — the world’s largest build-out, according to the report.

The government last month set a goal of 110 gigawatts of nuclear capacity by 2030 in its latest five-year plan draft, a 76% jump from the end of last year. The lofty target underscores the priority Chinese leaders have placed on the around-the-clock reliability of nuclear’s carbon-free electricity.

Small Business Checkpoint: One shock after another

Bank of America aggregated credit and debit card data shows gasoline spending per small business client rose 23% YoY in March – the strongest increase in several years – after declining over the previous two months. (…)

In Bank of America small business payments data, small wholesalers’ costs associated with inventory (i.e. distributors, truck/freight logistics and other delivery services) surged 62.6% YoY in March – the single largest monthly gain since the start of our data series in 2020.

This surge is echoed in the latest NFIB report, with the number of owners planning inventory investment in the coming months reaching the lowest level since May 2024. Additionally, of the small cohort of firms who pay tariffs directly, these payments were up almost 95% from the 2024 average level in March.

One silver lining may be that these payments are starting to fall, and, according to BofA Global Research, lower tariff rates following the Supreme Court’s reversal of tariffs imposed with the International Emergency Economic Powers Act are helping offset some of the pain at the pump. Still, compared to large companies, smaller firms are unlikely to feel relief in the near-term.

 

Payroll payments growth per small business client remained negative in March, marking three consecutive months of declines – the first such result in our series since 2021.

During this week’s earnings call, BofA CEO Brian Moynihan said that “BofA customers spent 6% more via credit and debit cards in the first quarter than they did in the same period a year earlier, reflecting a degree of confidence in their financial standing”, a statement relayed by several media and pundits. His CFO added that “Our data continues to tell us that the American consumer remains resilient.”

Three observations FYI:

• Gasoline prices exploded 40% in March. Nearly 60% of Americans use their credit card for fuel, around 40% use debit cards.
• In March, excluding higher gasoline spending, the MoM rise in total spending was a modest 0.1%, before inflation.
• YoY comps are upwardly biased against very weak spending 12 months ago, particularly on discretionary categories.

Unilever hikes price of Hellmann’s mayonnaise as suppliers try to offset rising fuel costs

Multinational food and packaged-goods conglomerate Unilever PLC is applying a 9-per-cent increase in the price it charges retailers for its Hellmann’s mayonnaise – another signal that soaring fuel costs are putting pressure on grocery prices.

The Anglo-Dutch company sent a notice to retailers late last week, saying the price hike – which will take effect in early July – reflects a “significant increase” in its costs. (…)

These conversations between suppliers and grocers are not just happening in Canada, said Henry Chambers, senior vice-president with Sentinel Management Consultants, a strategic advisory and commercial capability training firm that works with food suppliers around the world. “This is everywhere,” he said, as rising fuel costs have global effects, “… all the manufacturers have been hit.” (…)

Peter Chapman, founder of consulting firm SKUFood, said the impact of rising fuel costs might already be showing up in some grocery prices. Fresh produce, for example, operates under a pricing model in which increases in input costs such as fuel are incorporated almost immediately into prices, rather than being negotiated separately.

“It’s not $25 plus a fuel surcharge … it’s just broccoli this week costs $27,” he said. “The fresher it is, the sooner you’re going to see the change.”

• Downplaying fears about higher prices stemming from the war in Iran, he derided inflation as “fake” and said the war “is going along swimmingly,” (Bloomberg)