In focus today
In the euro area, the ECB publishes the minutes from its March meeting today. Given recent comments from Governing Council members, the minutes are likely to reflect increasingly hawkish discussions around further policy hikes.
Also in the euro area, May business sentiment indicators are released, with particular attention on firms’ selling price expectations, which saw the largest monthly increase in the survey’s 25-year history last month. We are looking to see if the rising expectations continue.
In Norway, GDP figures are released. We expect mainland GDP to have grown by 0.2% in Q1. Should that prove correct, growth will have come in somewhat below Norges Bank’s March monetary policy report projection of 0.4%, pulling the probability of a June rate hike marginally lower. Uncertainty around the figure is slightly larger than usual, with more of the Easter holiday falling in Q1 this year.
Additionally in Norway, the Oil Investment Survey will also be published today, where we will be watching closely to see whether the recent rise in energy prices has influenced investment plans among oil companies.
Sweden’s NIER survey is due at 09:00 CET. Besides an update on consumer and business sentiment figures, we will be paying close attention to price plans, which carry significant weight for the Riksbank. Half an hour later, the Swedish National Debt Office publishes its latest borrowing forecast. Despite a turbulent backdrop since the previous report in November, especially in recent months shaped by developments in the Middle East, we do not anticipate major revisions from the Debt office.
In the US, the April PCE inflation figures will be released, which is the Fed’s preferred gauge of underlying inflation in the US. The figure increased 3.2% y/y in March, well above the Fed’s 2% target, with markets expecting the price pressure to continue in the April figures. Also in the US, the second GDP estimate is released.
Economic and market news
What happened overnight
Between the US and Iran, Iran’s Revolutionary Guard has overnight struck a US military base in retaliation after the US carried out its second attack this week on Iranian military targets. Iran has warned that any further US strikes will trigger a larger response, putting the April ceasefire and peace talks under extensive pressure. The attacks come after Iranian state television reported details of a potential peace proposal on Wednesday. Under the proposed terms, the US would end a naval blockade of Iranian shipping ports while Iran would restore traffic through the Strait of Hormuz to pre-war levels within a month. The White House denied the report, calling it a “complete fabrication”, while Iran’s government has not commented.
Oil markets reversed yesterday’s optimism around a potential US-Iran deal, with Brent crude climbing to around USD 98/bbl following overnight strikes. Prediction markets have also shifted, with Polymarket now pricing the probability of shipping normalising through the Strait of Hormuz before end of June at around 37%, down from around 50% yesterday, reflecting growing uncertainty over whether a deal will be reached soon.
Equities: Equities took a breather yesterday and will decline further as markets open today. Instead of a peace deal, which investors are eagerly waiting for and pricing, the US carried out fresh strikes on Iran last night. Korean Kospi down 3% this morning and US and European futures point to a move 0.5-1% lower today, as oil prices and yields have retraced higher.
The big trade in markets – momentum – gave back some gains yesterday. Interestingly, this happened despite oil prices and yields being lower yesterday. US momentum stocks have rallied 5% in a week, and up almost 30% over the last month, so it makes sense to see days of profit-taking. In the absence of tech, consumer stocks led the market yesterday, across retail, staples, home builders etc. There was no macro data or earnings catalyst driving the sudden preference, rather it should be seen as a catch-up move, given profit-taking in the winners. Similarly, most shorted stocks also fared well yesterday.
FI and FX: Risk sentiment turned negative overnight on reports that the US has conducted new strikes on Iran. The EUR/USD has dropped below 1.16 and Brent oil rose from yesterday’s low of USD 94.25 /bbl towards USD 98/bbl. Yields are also higher overnight given the rise in the oil price. Yesterday, we entered a long USD/SEK recommendation, where we see potential in both a stable scenario and in a risk scenario where looming Fed hikes begin to weigh on broader risk sentiment. There is plenty of interesting macro data today with PCE figures from the US and closer to home we have the Swedish NIER survey on economic sentiment and the Q1 GDP from Norway.
