Tag: news

Shares of Chinese EV maker BYD surged the most in 13 months after a report that its factory in Bahia, Brazil, a former Ford Motor plant, secured export orders for about 100,000 vehicles from Argentina and Mexico. This development suggests BYD’s strategy to localize production in South America is still in its early stages and set to flood the continent with Chinese EVs.  

Bloomberg quoted Macquarie Capital analyst Eugene Hsiao, who said the local Chinese media report about BYD’s Brazil factory receiving large orders from Argentina and Mexico suggests that “this is positive for the broader BYD thesis, which is that overseas sales will become the core growth and profit driver over time.”

Brazil is BYD’s largest market outside China. The factory in Bahia is critical to the Chinese company’s overseas expansion plans in the Americas. The plant has a capacity to make 150,000 EVs per year.

In BYD’s home market of China, overall sales for the first two months of the year slumped 36% to 400,241 units. Competition in China has intensified as rivalry among domestic brands grows fiercer. However, exports have gained solid traction, with the company now planning to sell 1.3 million cars abroad.

“A higher gas price would potentially drive demand in the European market, which would benefit Chinese automakers that export to that market such as BYD,” Morningstar analyst Vincent Sun said, adding, “For Chinese market, gas bill is not as big a driver to EV demand as in overseas market.”

BYD shares in Hong Kong surged 8% on Monday, marking the largest gain in 13 months, as news of overseas expansion lifted investor sentiment.

The stock was a top performer on the Hang Seng Tech Index, with trading volume doubling to 35.7 million shares. Peers including Nio and Xiaomi climbed more than 5%.

Top BYD headlines (courtsey of Bloomberg):

• The Brazil plant has annual capacity of 150,000 vehicles and will increase production to 600,000 vehicles in phases

• BYD will launch the premium Denza Z9GT electric vehicle in Europe on April 8, offering up to 800 kilometers range

• The new vehicle can charge from 10% to 70% in about five minutes using BYD’s latest fast-charging system

• BYD unveiled its second-generation Blade Battery on March 9, promising to charge EVs from 10% to 97% in under nine minutes

• BYD is exploring entry into Formula 1 and endurance racing to boost global brand appeal

• BYD is actively considering building a manufacturing plant in Canada and keeping options open to acquire a global automaker

For readers heading to Mexico for spring break, one of the first things you may notice after stepping outside the airport terminal is how many BYD vehicles are already on the road. The flood of Chinese EVs is shifting into hyperdrive, and in the Americas, the invasion is already underway.

After Friday’s revelation that it was the first consecutive monthly Friday 13th for 11 years, DB’s Jim Reid writes that today’s nearly-as-impressive revelation is that this week sees the Fed, ECB, BoJ and BoE all meet in a single calendar week for the first time since December 2021. So a “super week” for central banks. All of them will have a very complex backdrop to deal with, shaped by geopolitical risk, volatile energy prices, and unsettled inflation dynamics.

Clearly the Middle East is the center of attention for markets right now, with oil prices fluctuating rapidly depending on the mood of the moment, which in turn is set by rapid burst headlines which are stale by the time the next flashing red headline hits. And since every asset class now reacts to any up or down tick in oil, it leads to cross-asset chaos, to say the least. The bigger problem, of course, is that the longer the conflict lasts, and the higher oil prices rise, the more hawkish central banks will have to be no matter the AI-driven bloodbath in the labor market. 

Indeed, while the Iran war is set to dominate the week ahead, we do still have those four big central bank meetings, where all eyes will be on their reaction functions to the war’s impact and the latest oil shock. Starting with the Fed, DB economists expect them to keep rates unchanged this week and think they’ll emphasize elevated geopolitical uncertainty. They only expect minor statement tweaks, including smoothed language on recent labor data (especially given January and February’s conflicting payrolls) and a nod to geopolitical risks, highlighting uncertainty and near-term upside pressure on inflation. Then at the press conference, they think Chair Powell is likely to stress that recent events mainly transmit through financial conditions—particularly oil prices. For now, however, economists think he’ll avoid signalling any meaningful shift in the near term policy outlook.

For the Fed, an important consequence of the conflict is that higher energy prices have begun to feed into inflation assumptions. So DB’s economists have nudged up their headline inflation estimates for this year, and they expect Fed officials to reflect a similar adjustment when they publish their updated Summary of Economic Projections. Indeed, core PCE inflation has registered back-to-back 0.4% monthly increases now, pushing the year-on-year rate to 3.1%, the highest since early 2024. For the dot plot, economists are still expecting it to signal one rate cut this year, although it wouldn’t take much to shift the median dot for 2026. Clearly though, the outlook is going to remain heavily dependent on the oil price. For example, our economists have found that a sustained oil price around $100/bbl would still see the projected tax benefits to consumers from the One Big Beautiful Bill Act outweigh the drag from higher effective energy costs. However, a move toward $150/bbl would pose a more material risk to consumer spending and the broader outlook.

Beyond the Fed, this week’s incoming data is unlikely to materially alter the tone of the meeting. February’s industrial production today is expected to rise by 0.3%, slower than January’s 0.7%, largely due to softer utility output, though oil and gas extraction will be worth monitoring. Otherwise, the regional manufacturing surveys from New York and Philadelphia could reflect some drag from geopolitical uncertainty, with particular attention on capital spending components. And given the recent labor market volatility, Thursday’s initial jobless claims will take on added importance as they fall within the March employment survey window.

Away from the US, this Thursday will bring the ECB, BoE and BoJ meetings, with DB economists expecting all three to leave rates on hold, with the emphasis firmly on guidance rather than action. At the ECB, expect the Governing Council to acknowledge heightened uncertainty and near-term upside risks to inflation, while stopping short of explicitly flagging medium term risks. Also expect a strong reiteration of policy flexibility and a clear message underscoring the ECB’s unwavering commitment to price stability, with officials keen to signal that they stand ready to act to avoid a repeat of the 2022–23 inflation episode. 

Then in the UK, DB thinks the MPC will lean into a dovish wait and see stance amid a more clouded outlook following the Iran related energy shock. Expect a less divided vote than in February, with the majority favoring an unchanged Bank Rate, while two members continue to favor a cut. Although DB economists still sees two rate cuts this year, recent developments have pushed back the expected timing.

Over in Japan, the BoJ is expected to maintain its current stance, with attention focused on Governor Ueda’s press conference. While underlying fundamentals could justify an early hike, elevated oil prices and growth risks are likely to temper near term action, and sustained crude prices above $100/bbl would reduce the likelihood of an April move. Meanwhile, other central banks making decisions this week include the RBA (Tuesday; expect a hike), the BoC (Wednesday), the SNB and the Riksbank (Thursday). The latter three are widely expected to see no change in rates.

Finally this week, notable data includes Germany’s Zew survey for March tomorrow and UK labor market data due Thursday. In the geopolitical sphere, President Trump and Japanese PM Takaichi are meeting in Washington, with defence cooperation expected to be the primary topic (see more in our Chief Japan economist’s week ahead here). In Europe, this week’s events include an EU leaders’ summit (Thursday to Friday). And on earnings, the lineup includes Micron, FedEx and Lululemon in the US as well as Tencent and Alibaba in China. See the day-by-day calendar of events at the end as usual for more.

Courtesy of DB, here is a day-by-day calendar of events

Monday March 16

• Data: US March Empire manufacturing index, NAHB housing market index, February industrial production, capacity utilisation, China February retail sales, industrial production, home prices, investment, Italy January general government debt, Canada February CPI, housing starts
• Earnings: Standard Life
• Other: EU foreign affairs council meeting

Tuesday March 17

• Data: US March New York Fed services business activity, February leading index, pending home sales, Germany March Zew survey, Eurozone March Zew survey, Canada February existing home sales
• Central banks: RBA decision
• Earnings: Lululemon, Oklo
• Auctions: US 20-yr Bond (reopening, $13bn)

Wednesday March 18

• Data: US February PPI, January factory orders, total net TIC flows, Japan January Tertiary industry index, February trade balance, Canada January international securities transactions
• Central banks: Fed decision, BoC decision
• Earnings: Tencent, Micron

Thursday March 19

• Data: US March Philadelphia Fed business outlook, January new home sales, wholesale trade sales, initial jobless claims, UK January average weekly earnings, unemployment rate, February jobless claims change, Japan January core machine orders, capacity utilisation, Eurozone January construction output, Q4 labour costs, Australia February labour force survey
• Central banks: rate decisions from the ECB, the BoJ, the BoE, the SNB and the Riksbank
• Earnings: Alibaba, Accenture, Enel, FedEx, Vonovia
• Auctions: US 10-yr TIPS (reopening, $19bn)
• Other: Leaders of US and Japan meet in Washington, European Council meeting (through Friday)

Friday March 20

• Data: UK February public finances, Germany February PPI, Italy January trade balance, current account balance, ECB January current account, Eurozone January trade balance, Canada January retail sales, February industrial product price index, raw materials price index
• Central banks: China 1-yr and 5-yr loan prime rates, ECB’s Nagel speaks

* * * 

Finally, looking at just the US, the key economic data release this week is the PPI report on Wednesday. The March FOMC meeting is on Wednesday. The post-meeting statement will be released at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM.

Monday, March 16 

• 08:30 AM Empire State manufacturing survey, March (consensus +3.9, last +7.1)
• 09:15 AM Industrial production, February (GS flat, consensus +0.1%, last +0.7%); Manufacturing production, February (GS +0.1%, consensus +0.1%, last +0.6%); Capacity utilization, February (GS 76.1%, consensus 76.2%, last 76.2%): We estimate industrial production was unchanged in February, reflecting strong auto production but weak electricity production. We estimate capacity utilization edged down to 76.1%.
• 10:00 AM NAHB housing market index, March (consensus 37, last 36)

Tuesday, March 17

• 10:00 AM Pending home sales, February (GS flat, consensus -0.7%, last -0.8%)

Wednesday, March 18 

• 08:30 AM PPI final demand, February (GS +0.4%, consensus +0.3%, last +0.5%); PPI ex-food and energy, February (GS +0.3%, consensus +0.3%, last +0.8%); PPI ex-food, energy, and trade, February (GS +0.3%, consensus +0.3%, last +0.3%); 10:00 AM Factory orders, January (GS +0.1%, consensus +0.1%, last -0.7%) : We forecast that factory orders increased by 0.1% in January, driven by a rebound in commercial aircraft orders.
• 02:00 PM FOMC statement, March 17-18 meeting: As discussed in our FOMC preview, we expect the FOMC to leave the funds rate unchanged at 3.50–3.75%. We expect Governors Bowman, Miran and Waller to dissent in favor of a 25bp cut. The Committee is likely to note in its statement that the war in Iran has increased uncertainty about the outlook and will likely raise inflation and weigh on economic activity in the near term. The Summary of Economic Projections is likely to show changes to the 2026 forecasts in line with our own, including higher core (+0.2pp to 2.7% Q4/Q4) and headline (+0.6pp to 3.0%) inflation, lower GDP growth (-0.2pp to 2.1%), and a higher unemployment rate (+0.2pp to 4.6%). We expect little change in the dot plot, where the median is likely to continue to show one cut in each of 2026 and 2027. We recently pushed the two additional rate cuts in our forecast back to September and December. 

Thursday, March 19 

• 08:30 AM Initial jobless claims, week ended March 14 (GS 210k, consensus 215k, last 213k); Continuing jobless claims, week ended March 7 (consensus 1,850k, last 1,850k): We expect initial jobless claims to decline by 3k. Initial claims remain below their average level in 2025H2 and the layoff rate edged down in January, suggesting that nationwide layoffs remain low despite the increase in alternative layoff measures in Q4 of last year. 
• 08:30 AM Philadelphia Fed manufacturing index, March (GS 7.0, consensus 10.0, last 16.3)
• 10:00 AM New home sales, January (GS -2.0%, consensus -2.7%, last -1.7%): We estimate that new home sales fell by 2.0% in January, reflecting a drag from winter storm Fern.

 
Friday, March 20 

• There are no major data releases scheduled.

Source: DB, Goldman

The White House has struggled to present the American public and the world with a clear timeline or precise strategy on Operation Epic Fury, but Israel has seemed clearer on signaling it is settling in for a longer war.

Israel is bracing for its war with Iran to stretch well into April, even as officials quietly concede the government in Tehran is unlikely to collapse, according to Israeli media.

This has Israel has expanded its attacks not just to Iran’s oil and energy sites, but more broadly to its defense industrial sector, wanting to see even Tehran’s ability to manufacture new missiles utterly destroyed.

And according to Ynet, “At the same time, the idea of encouraging public unrest inside Iran has not been abandoned, though officials acknowledge uncertainty about how effective such efforts might be.”

“We continue to strike regime targets, mainly in Tehran. We are entering the decisive phase. We are aiming to bring the people out into the streets. It’s not only us – the Americans are also working toward that,” an Israeli official stated.

“Not everything can be controlled, but everything possible is being done to make it succeed. The regime must be weakened as much as possible, including the Basij,” the official added. “We are striking them and killing them in the thousands.”

Israeli officials have further made clear they have assets on the ground, or Iranians who have helped spot IRGC/Basij checkpoint and security locations. Israel’s military has publicized some instances of active strikes on these locations.

As for whether targeting information is actually being communicated by anti-regime Iranians, this could just be Israeli propaganda intent on sowing discord and suspicions among the Iranian populace.

Still, Israeli officials have admitted they are skeptical that street protests alone could topple the Iranian government. Over in Washington, President Trump apparently thought ‘decapitation strikes’ would quickly result in some kind of rapid uprising in the streets and change of government, but that didn’t appear even close to happening.

On the White House’s series of miscalculation as this war is in week three with no signs of an off-ramp, Robert D. Kaplan has written in Foreign Affairs:

The biggest U.S. foreign policy fiascos happened because policymakers were obsessed with regional and global consequences they often could not properly manage, and thus ignored critical conditions on the ground. In Vietnam, U.S. leaders overlooked the history and nature of Vietnamese nationalism; in Iraq, it was sectarianism. Tuchman has encouraged leaders to trust area specialists more than grand strategists or democracy promoters. Sophisticated and specific cultural knowledge, she has observed, is much more useful than metrics and shadowy schemes.

Middle-sized wars often stem from misunderstandings about the place intervention is meant to help. The key, then, is for the intervening country to know what it is getting itself into. This may seem easy, but it can be the hardest part of policymaking. Bringing up cultural matters and differences is tricky because it can easily be misconstrued as prejudice, which pushes people to avoid critical conversations about realities on the ground. But it is such discussions that can keep a superpower out of trouble.

Meanwhile, as far as a timeline, Israeli leaders have admitted that it’s renewed war with Hezbollah is expected to outlast the conflict with Iran. Hezbollah has been launching missiles on northern Israel, while IDF ground forces have moved in, also as Beirut continues to get pounded from the air.

Authored by Jill McLaughlin via The Epoch Times,

The Florida Legislature passed new election legislation modeled after President Donald Trump’s proposed SAVE America Act.

House Bill 991, sponsored by state Rep. Jenna Persons-Mulicka, passed along party lines by a vote of 83 to 31.

“We are the Election Integrity State!” Persons-Mulicka wrote on X after the vote.

Sponsors of the bill moved the effective date to appease critics who feared the new identification requirements would discourage some voters from participating in midterm elections. The new laws won’t take effect until Jan. 1, 2027.

The bill requires Floridians to show proof of citizenship to register to vote, requires a valid photo ID to vote, makes paper ballots the primary method of voting, and bans student IDs as an acceptable voter ID.

Nearly all Florida driver’s licenses and ID cards are Real-ID compliant—a process that already verifies citizenship.

Once in place, the new regulations will also make it a felony for political parties, committees, organizations, and candidates to accept or solicit contributions from foreign nationals for any state elections.

Florida state Democrats voted against the bill, dubbing it the “Show Your Papers Act.”

Rep. Anna Eskamani, a Democrat representing Orlando, said the measure would restrict “all kinds of IDs Florida voters can use.”

“Student IDs and retirement center IDs would no longer be valid; driver’s licenses, state ID cards, military ID, and licenses to carry concealed weapons would still be accepted as proof of voter identity,” Eskamani said in a Facebook post.

The ACLU’s Florida Chapter condemned the measure’s passage, calling it an anti-voter bill.

“These changes are not neutral or harmless—they would fall hardest on low-income voters, students, seniors, women, and Black and brown Floridians,” said Bacardi Jackson, executive director of the ACLU Florida chapter.

“This wave of anti-voter legislation is advancing amid ongoing abuses of power that pose unprecedented threats to American democracy.”

 

Florida State Rep. Jenna Persons-Mulicka, R-Fort Myers. Courtesy of the Florida House of Representatives

A similar effort by congressional Republicans has stalled for months in the U.S. Senate.

Florida Secretary of State Cord Byrd encouraged Congress to move forward with the SAVE Act after Florida’s bill passed.

“Florida leads the nation in election integrity because we don’t rest on our laurels and are always looking to improve,” Byrd posted on X. “It’s now time for Congress to act on critical election integrity measures.”

Republican Leader John Thune (R-S.D.) has been unable to advance the SAVE Act, despite growing pressure from the public and within his party.

Thune told colleagues on March 10 that he didn’t have the votes to pass the act by employing the talking filibuster. He plans to bring the bill to the Senate floor next week.

After a strong gain in January, US Industrial Production continued to expand in February, rising 0.2% MoM (better than expected +0.1%) – the fourth straight month of gains with Production up 1.44% YoY…

Source: Bloomberg

Manufacturing output also beat expectations, rising 0.2% MoM in February.

• Durable manufacturing output edged up 0.1 percent, with mixed results across categories; the index for motor vehicles and parts posted the largest gain, and the index for machinery posted the largest loss.

• Nondurable manufacturing output rose 0.2 percent, with gains in the production of chemicals, of plastic and rubber products, and of paper products outweighing declines in the output of petroleum and coal products and of food, beverage, and tobacco products. The output of other manufacturing (publishing and logging) rose 1.3 percent.

• Mining output increased 0.8 percent in February, following a 0.9 percent increase in January. The output of utilities fell 0.6 percent in February, reflecting no change in the index for electric utilities and a 4.7 percent drop in the index for natural gas utilities.

Source: Bloomberg

Capacity Utilization printed 76.3 (better than expected)…

…maintaining the positive trend since Trump’s second term began.

British Prime Minister Keir Starmer spoke to President Trump on Sunday night, with Starmer on Monday describing that the two leaders discussed events “in the way that you would expect between two allies and two leaders” and he had a “good relationship” with the US president.

His articulation of an apparently positive and frank talk comes while he trying to dismiss suggestions the relationship with Britain’s key ally had been damaged due to the Iran war.

President Trump has been very clearly making the case that European and NATO countries must back his effort to unblock global oil transit in the Strait of Hormuz

However, Starmer has made clear to his domestic population that the UK won’t be dragged into a wider war with Iran, even as London tries to figure out what role in might play in any US-led Hormuz plan.

“Ultimately, we have to reopen the Strait of Hormuz to ensure stability in the (oil) market. That is not a simple task,” Starmer told reporters.

“So we’re working with all of our allies, including our European partners, to bring together a viable collective plan that can restore freedom of navigation in the region as quickly as possible and ease the economic impact,” he added.

Below is a key line of Starmer’s:

“While we are taking the necessary action to defend ourselves and our allies, we will not be drawn into the wider war,” he said.

But it seems he’s trying to have his cake and eat it too, acknowledging that Britain is on board with trying to piece together a multinational security effort – and yet Starmer has stressed it would not be a NATO-led mission.

According to more of his comments at a Downing street press conference:

The prime minister said the UK, which is considering sending ships and mine-hunting drones to the Middle East, was working with allies on a “viable plan” to reopen shipping lanes. Otherwise energy prices would remain high.

“It’s a discussion; we’re not at the point of decisions yet. It’s obviously a difficult question, that goes without saying, in relation to how you safeguard maritime traffic … But we are discussing that with the US, with Gulf partners and with Europeans,” he said.

He said that while the UK would take “necessary action” to defend itself and allies “we will not be drawn into the wider war”, as concern mounts at home over the prospect of a drawn-out conflict.

“I want to see an end to this war as quickly as possible, because the longer it goes on, the more dangerous the situation becomes, and the worse it is for the cost of living back here at home,” he said.

President Trump on Air Force One after he spoke to the UK’s Prime Minister Keir Starmer,

“I don’t want the UK after we win the war, I want them before”

“Whether we get their support or not”

“I can say this, and I said it to Keir Starmer”

“We will remember” pic.twitter.com/DUb7xxXzBM

— Farrukh (@implausibleblog) March 16, 2026

The British leader also rolled out the first domestic relief package tied to the US and Israeli-initiated war’s economic fallout, announcing a £53 million ($70 million) support plan for vulnerable households that rely on heating oil after fuel prices surged.

Stock futures are higher AS energy prices dip modestly even as the war in the Middle East enters a third week, with Trump’s endgame unclear amid requests for international help to reopen the SoH.  As of 8:00am ET, S&P futures are up 0.8% and and Nasdaq futures gain 1.0% with all Mag 7 names higher in premarket trading led by Meta which is reportedly planning layoffs that could affect 20% or more of the company. The bounce in futs and the slide in oil coincided with comments from the Iranian Foreign Minister that the US has already learned a good lesson. However, he did also note that the nation is not requesting a ceasefire and has not messaged the US.  Cyclicals outperform Defensives in what appears to be a relief rally. As JPM writes this morning, “it is unclear if futures are following the recent trend of a higher Monday into a sell off for the balance of the week, or if the market is pricing a pivot despite the likelihood that oil production curtailments will approximately double this week.” Bond yields are lower by 1-2bp as the curve bull steepens, and USD is lower. Commodities are weaker ex-Energy. Initially oil jumped at the start of futures trading on Sunday night following a second attack in three days on Fujairah, a vital port in the UAE that’s just outside the Strait of Hormuz, but has since turned red. And while shipping through the Strait has been all but halted since the war started, several Iranian tankers as well as a vessel controlled by have made the journey. Today’s macro data focus is on Industrial Production, home prices, and regional activity indicators. The Fed meeting (plus other major CBs) and PPI are the other major releases this week.

In premarket trading, Mag 7 names are all higher: Meta rises 2% after Reuters reported that the social media giant is planning layoffs that could affect 20% or more of the company (Nvidia +1%, Tesla +0.9%, Apple +0.3%, Microsoft +0.6%, Amazon +0.5%, Alphabet +0.1%).

• Micron Technology (MU) climbs 4% — lifting other memory and storage companies — as analyst optimism grows ahead of the chipmaker’s results later this week.
• Nebius shares jumped 15% in premarket trading after Meta said it will pay as much as $27 billion over the next five years for access to artificial intelligence infrastructure from the cloud provider
• National Storage Affiliates Trust (NSA) rises 25% after agreeing to be purchased by Public Storage Operating Co.
• Sable Offshore Group (SOC) rises 6% after the energy company said it restarted oil transportation at its California pipeline after the Trump administration invoked the Defense Production Act.

While attacks on oil facilities kept crude trading well above $100 a barrel, prices slipped about $4 off levels hit earlier in the day. Following the transit of two vessels on the weekend, India is attempting to get six others to cross, while several other nations are trying back channels to Iran to ensure safe passage for their tankers. 

“The market is trying to stabilize, but it is not one that has turned optimistic,” said Charu Chanana, chief investment strategist at Saxo Markets. “Equities may welcome any sign that Hormuz could be reopened, but with further strikes still being threatened and diplomacy still patchy, conviction is low and positioning is likely to stay very twitchy.”

On tech, after the Mag-7 entered a technical correction on Friday, investors will turn attention to Nvidia’s annual AI conference this week. CEO Jensen Huang is giving a keynote speech at 2 p.m. ET today. In other AI news, Nvidia partner Hon Hai reported 4Q net income below consensus. Helping the tech space, the US Commerce Department withdrew ​its planned rule on ​AI chip exports, Reuters reported.

Turning to the broader market, several strategists are calling the bottom for equities: Morgan Stanley’s Michael Wilson says the market’s correction phase is nearing its end, and JPMorgan’s Mislav Matejka recommends buying the dip, while on the other side Goldman warns that in a severe oil shock the S&P could fall to 5,400. Meanwhile, Deutsche Bank strategists write that inflows to equity funds (+$13.2b) picked up last week, with the biggest inflows into Japan (+$6.3b) since May 2013 and record Korea inflows (+$8.9b) while China saw outflows (-$7.8b).

As we noted last night, Goldman predicts that the AI investment boom should offset the drag from modestly weaker economic activity for corporate earnings in the US, reiterating a forecast for 12% EPS growth for the S&P 500 in 2026. Global equities are at risk of a correction, though probably not a bear market, according to other strategists at the bank. On the other hand if the oil crunch extends, the S&P could drop as low as 5,400 in a worst case scenario according to Goldman.

Wild swings in oil have led to an unusual range of moves across rates, commodities and equities, fueling significant trading activity in exotic options by hedge funds. Financial stocks are off to their worst start to a year since the Covid pandemic, with investors expecting more pain ahead as worries over everything from private credit to the Iran war roil the troubled sector.

Attention will also focus this week on a slew of central bank meetings, including at the Federal Reserve, European Central Bank, Bank of Japan and the Bank of England. Those will be crucial to gauge policymakers’ thinking on how the oil shock will impact economy and the prospect for interest rates.

While oil near $100 a barrel fanning inflation fears, it’s also likely to dampen economic growth, casting uncertainty on how policymakers will respond.  “Every day that goes by with the Hormuz Strait closed is another bad news for the global economy,” said Francois Rimeu, senior strategist at Credit Mutuel Asset Management. “If the crisis continues there will be at some point some kind of trigger that will make investors realize the scale of the supply shock that’s building up.”

European stocks bounced off the day’s lows as Brent crude futures have pulled back from earlier highs. The moves have coincided with comments from the Iranian Foreign Minister that the US has already learned a good lesson. However, he did also note that the nation is not requesting a ceasefire and has not messaged the US. The Stoxx 600 is down a fourth session, falling 0.2%. Energy stocks rally after fresh attacks on oil infrastructure in the Middle East caused Brent prices to surge, while automakers lag.  Here are some of the biggest movers on Monday:

• GN Store Nord shares jump as much as 42%, the most on record, after Amplifon agreed to buy its hearing-aid business. Amplifon shares drop as much as 13%.
• Commerzbank shares climb as much as 5.3% after UniCredit made a €35 billion for the lender that will allow it to increase its shareholding beyond 30%, easing the path for a potential future acquisition.
• MTN shares surge as much as 7.4%, the most in two months as Africa’s largest wireless carrier returned to profit, declared a dividend that beat estimates and said it plans to buy back shares.
• Tecan shares drop as much as 6.3% to the lowest level in more than a decade after the Swiss maker of laboratory equipment provided guidance for 2026 which analysts said will spur downgrades to estimates.
• Idorsia shares fall as much as 18% to a six-month low after the Swiss pharma company said Srishti Gupta will step down as chief executive officer and from the board of directors by mutual agreement.
• Standard Life shares drop as much as 3.6% after 2025 earnings with analysts noting that, while results were broadly as expected, IFRS numbers were below forecasts.

In FX, the Bloomberg Dollar Spot index falls 0.4%, with the greenback down versus all majors. USD/JPY has continued to back away from 160 following comments from the Japanese Finance Minister.

In rates, 10-year yields slipped two basis points, after rising for five straight sessions with globaL bond yields are generally softer heading into a busy week for G-10 central banks as traders weigh how policymakers will weigh the inflation and growth implications from rising energy prices. The US Treasury market has erased all its gains for the year amid concerns about both inflation and growth risks. A batch of rate decisions are due this week, including the Fed on Wednesday. It’s expected to hold rates steady, though not without dissent. Bloomberg Economics expects the central bank to signal an extended pause ahead and add two-sided language around the rate path — flagging upside risks to inflation as well as downside risks to employment.

As Wall Street dialed back its bets on rate cuts for this year, bonds from the US to Japan and Australia have dropped. A gauge of global debt has also ceded its year-to-date gains. Gold traded below $5,000 as high oil prices threaten Fed rate cuts. Still, analysts at Goldman Sachs Group Inc. expect Treasuries and most other government bonds to edge higher by year-end, seeing growth risks outweighing the inflation pulse.

In commodities, spot gold and silver are down 0.7% and 3.3% respectively. Bitcoin continues to climb, up 2.2%. WTI drops 2.5% to $96.25 after rising as high as $101 early in the session.

Looking at today’s calednar, Empire manufacturing for March is due at 8:30 a.m. New York, followed by February readings for industrial production and capacity utilization at 9:15 a.m. The Fed’s external communications blackout continues. 

Market Snapshot

• S&P 500 mini +0.7%
• Nasdaq 100 mini +0.9%,
• Russell 2000 mini +0.6%
• Stoxx Europe 600 -0.2%,
• DAX -0.2%,
• CAC 40 -0.4%
• 10-year Treasury yield -2 basis points at 4.26%
• VIX -1.2 points at 26.03
• Bloomberg Dollar Index -0.3% at 1213.82,
• euro +0.3% at $1.1449
• WTI crude +0.6% at $99.34/barrel

Top Overnight News

• Donald Trump demanded other countries, including China, help secure passage for ships in the Strait of Hormuz. He told the FT his planned summit with Xi Jinping may be delayed if Beijing doesn’t assist. Iran’s foreign minister denied it’s seeking talks or a ceasefire after Trump told NBC he’s willing to make a deal but wants better terms. BBG
• Top U.S. and Chinese economic officials were due to conclude talks in Paris on Monday, with potential areas of agreement in agriculture, critical minerals and managed trade that could be taken up by U.S. President Donald ‌Trump and Chinese President Xi Jinping in Beijing. In the talks, the Chinese side showed openness to potential additional purchases of U.S. agricultural goods. RTRS
• Japan’s defense minister said the nation has no current plans to send warships to the Strait of Hormuz. Separately, the finance minister said officials are prepared to respond boldly to currency market movements. BBG
• Volodymyr Zelenskiy said a drone deal with the US is still possible despite Trump’s public rejection. BBG
• American oil executives delivered a bleak message to Trump officials in recent days: The energy crisis the Iran war has unleashed is likely to get worse. Exxon CEO Darren Woods said that oil prices could rise past current elevated levels if speculators unexpectedly bid up prices and that markets could see a supply crunch of refined products. WSJ
• China’s economy began the year on a firmer footing as factory output quickened while retail sales and investment rebounded in January-February, offering early relief for policymakers as the U.S.-Israeli war with Iran injects fresh uncertainty for growth. China saw retail sales (+2.8% vs. the Street +2.5%) and industrial production (+6.3% vs. the Street +5.3%).  RTRS
• Socialist Emmanuel Gregoire led the first round of Sunday’s Paris mayoral election. Runoffs for the municipal polls will be held March 22. BBG
• Wealthy individuals have sought to pull more than $10bn from some of the largest private credit funds in the 1st quarter, prompting investment managers to limit withdrawals and threatening to stall one of Wall Street’s most important sources of growth. FT
• Meta will pay up to $27 billion over the next five years for access to AI infrastructure from neocloud firm Nebius, as it seeks to compete with the industry’s top frontier models. Meta shares rose premarket after Reuters reported it’s planning layoffs that may affect 20% or more of its workforce. The cuts are aimed at offsetting costly investments in AI. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks mostly declined amid cautiousness at the start of a busy week of central bank activity and following the continued conflict after the US struck military targets in Iran’s Kharg Island oil export hub, but left oil infrastructure intact. ASX 200 was led lower by mining, materials, resources and tech, while the RBA kicked off its two-day policy meeting, where the central bank is widely expected to hike rates for the second consecutive meeting amid inflationary pressures. Nikkei 225 retreated amid losses in utilities and electric names due to the ongoing energy-related uncertainty, despite Japan beginning its emergency oil release, while the Japanese data calendar is quiet to start the week, but begins to pick up on Tuesday, and the BoJ are also set to conduct a policy meeting later in the week. Hang Seng and Shanghai Comp were mixed as participants digested stronger-than-expected activity data for China, and with US-China trade talks in Paris on Sunday said to be constructive and will resume today. However, there were also comments from US President Trump, who called for China to help open the Strait of Hormuz and suggested a potential delay to the Trump-Xi summit scheduled later this month.

Top Asian News

• China’s stats bureau’s spokesperson expects consumption to rise steadily this year as policy measures gain traction, but noted that more support is needed.
• Japanese Finance Minister Katayama said prepared to take decisive steps on FX.

European bourses are mixed to start the week as the Middle East conflict remains the dominant macro theme. The FTSE 100 outperforms as oil majors gain with crude above USD 100/bbl, while the FTSE MIB lags after Amplifon declines on news it will acquire GN Store Nord’s hearing unit for DKK 17bln. European Sectors are also mixed. Energy leads as Brent holds above USD 100/bbl, with Real Estate also firmer as Segro gains following a broker upgrade and UK Rightmove house prices rise M/M. Basic Resources initially underperformed as spot gold dips below USD 5,000/oz, while Banks remain pressured.

Top European News

• Swiss Sight Deposits (w/e 13th Mar), CHF: Domestic 433.5bln (prev. 428.8bln), Total 454.4bln (prev. 454.07bln).
• UK Rightmove House Prices YY (Mar) -0.2% (Prev. 0.0%).
• UK Rightmove House Prices MM (Mar) 0.8% (Prev. 0.0%).

FX

• DXY is marginally softer as the index takes a breather after reclaiming the 100.00 level, while traders brace for a heavy central bank week and monitor Middle East tensions. US President Trump is reportedly seeking a coalition to reopen the Strait of Hormuz and weighing the seizure of Iran’s Kharg Island, while also warning NATO and calling on China to help secure the waterway. DXY trades in a narrow 100.18–100.48 range after Friday’s 99.59–100.54 band. The FOMC is widely expected to leave rates unchanged at 3.50–3.75% on Wednesday, with markets not pricing a cut until Q4 2026.
• EUR/USD rebounds from around a seven-month low amid the softer dollar but remains below 1.1500 (1.1414–1.1456 range) amid quiet Eurozone newsflow and geopolitical uncertainty. The pair remains within Friday’s 1.1411–1.1530 range. The ECB is expected to keep rates unchanged at 2.0% on Thursday, though higher energy prices have pushed market pricing slightly more hawkish, with a 25bp hike now fully priced by year-end.
• GBP/USD edges higher alongside the weaker dollar after recently hitting a year-to-date low. UK ministers are set to announce a GBP 50mln support package for households facing the energy shock from the Iran conflict, while the UK is also exploring an EU tuition fee cut to reset post-Brexit relations. The BoE is expected to keep the Bank Rate at 3.75% on Thursday, though energy-driven inflation risks have prompted a more hawkish repricing.
• USD/JPY is choppy in the absence of Japanese data, with comments from Japanese Finance Minister Katayama stating authorities are ready to take decisive FX steps if needed. The pair trades within 159.17–159.75, inside Friday’s 159.01–159.76 range. The BoJ this week is expected to keep rates unchanged at 0.75%, although markets still price a possible hike by June.
• Antipodeans outperform. NZD/USD leads gains despite mixed domestic data, while AUD/USD reclaims the 0.7000 level ahead of the RBA decision tomorrow, where the central bank is widely expected to deliver another rate hike.

Fixed Income

• USTs are slightly firmer as Treasuries digest the weekend’s modest geopolitical escalation and higher energy prices. Futures trade in a narrow 111-12+ to 111-21+ range, but remain near recent lows at the bottom of March’s 111-11 to 114-06 band and close to the January and February troughs of 111-06+ and 111-08+ as markets await a busy central bank week.
• Bunds edge higher in quiet trade, with gains of around nine ticks in narrow sub-20 tick ranges. Focus in Europe centres on energy-related meetings this week, including a press conference later today that could discuss EU-wide measures to stabilise energy markets and updates on proposals for a “coalition of the willing” to reopen the Strait of Hormuz.
• Gilts outperform after gapping higher by 26 ticks and extending gains to an 88.84 peak, leaving futures up just over 30 ticks at best. The move reflects partial recovery after Gilts had previously underperformed peers during the Middle East-driven energy shock.

Commodities

• Crude Futures extend gains as markets digest weekend escalation in the Iran conflict and fresh risks to regional energy infrastructure. WTI trades above USD 100/bbl within a USD 96.74–102.44/bbl range, while Brent hovers around USD 105/bbl (USD 102.04–106.50/bbl), however WTI narrowly underperforms Brent futures on news US called for oil producers to increase output to combat surging global energy prices. The US conducted strikes on military targets on Iran’s Kharg Island, from where most Iranian oil exports originate, though oil infrastructure was left intact. Prices also rise after reports the UAE’s Fujairah port was struck with loadings suspended, while Saudi Crown MBS reportedly urged Washington to maintain military pressure on Iran. Meanwhile, Trump says China should help reopen the Strait of Hormuz ahead of a planned Beijing visit.
• Nat Gas is firmer alongside the broader energy complex as geopolitical risks underpin prices, with front-month Dutch TTF near EUR 52/MWh.
• Spot Gold is flat in choppy trade within a USD 4,967.77–5,036.01/oz range as the metal tracks USD movements while traders monitor oil-driven inflation risks ahead of a heavy central bank week.
• Base Metals are softer across the board. Copper recovers from Friday’s lows but upside is capped by cautious risk sentiment. Meanwhile, Aluminium Bahrain begins a phased shutdown of Reduction Lines 1–3 (around 19% of its 1.62mln-tonne annual capacity) in response to the effective closure of the Strait of Hormuz.
• Senior US administration official acknowledges that prices will continue to rise but admits there is little the government can currently do at the moment, according to a CNN reporter.
• Oil executives warned the Trump administration the energy crisis will likely worsen and that the closure of the Strait of Hormuz might push up oil prices further, according to WSJ.

Trade/Tariffs

• US and Chinese officials held candid and constructive talks in Paris on Sunday and agreed to enhance stability in the trade relationship, according to sources familiar with the talks, while the sides met for six hours and will resume talks on Monday. US Treasury Secretary Bessent and USTR Greer raised the need for China to buy more Boeing aircraft, US coal, oil and gas, while US and Chinese officials discussed solutions to difficulties faced by some American firms in obtaining rare earths. Talks will continue on a technical level on Monday.
• China responded to US allegations of forced labor in the Section 301 probe and has lodged a formal representation with the US over the investigation.
• Indian Trade Secretary said the US-India trade deal will be signed when the US re-establishes global tariff rates. The US is working on recreating global tariff architecture.
• Indian Trade Secretary said exports to West Asia have been impacted by the Middle East situation; India is considering measures to support exports to the Middle East.

Geopolitics

• US President Trump said he ordered a strike that wiped out every military target on Kharg Island, which is where Iran exports nearly all of its oil from, but left the oil infrastructure intact which he would reconsider if Iran interferes with the safe passage of ships in the Strait of Hormuz.
• US President Trump said he is hearing that Iran’s new Supreme Leader Khamenei may be dead, and that it is not clear if Iran has laid mines in the Strait of Hormuz, while he also stated that he is not ready to make a deal with Iran because the terms aren’t good enough yet. Furthermore, Trump said recent strikes on Kharg Island demolished most of the island and commented that they “may hit it a few more times just for fun”.
• US President Trump posted that they have destroyed 100% of Iran’s military capability and that many countries will send warships to help keep the Strait of Hormuz open and safe.
• US President Trump said they have had strong results in Iran and he does not believe Iran is ready to negotiate, but will be ready to negotiate at some point. Trump also said the US is talking to other countries about policing the Strait of Hormuz and cannot say which countries will help yet, while a few countries would rather not get involved. Furthermore, he called on NATO to help and thinks China should come in to help on the Strait of Hormuz.
• US President Trump seeks a Hormuz coalition and is weighing seizing Iran’s critical oil depot on Kharg Island — a move that would require US boots on the ground — if tankers remain bottled up in the Persian Gulf, according to US officials cited by Axios.
• US President Trump warned that NATO faces a very bad future if US allies fail to assist in opening up the Strait of Hormuz, according to FT.
• US lawmakers have begun talking about a supplemental funding bill for the Iran war, Punchbowl reports; package could have a USD 100bln or greater price tag, according to sources.
• Israel’s IDF has launched a focused ground operation in southern Lebanon, including a build-up of forces in order to capture more forward lines, N12 reported.
• Israeli Home Front notifies of a missile attack from Iran targeting areas in central Israel.
• Iran’s Foreign Minister Araqchi says no messages have been exchanged with the US and that Tehran has not asked for a ceasefire as the “war needs to end in a way that ensures it does not happen again”.
• Iran’s Foreign Ministry Spokesperson Baghaei says parties not involved in the war have had vessels pass through Hormuz with coordination and permission from Iran’s military. The Strait of Hormuz is only closed to the enemies of Iran.
• The Iranian Army Spokesperson said the support centre of the USS Ford in the Red Sea are considered as targets, Al Arabiya reported.
• Iran’s media operations centre warns residents in specific areas of Dubai and Doha of possible attacks in the coming hours, while it stated that US military personnel are hiding in locations in Doha and Dubai and urges residents to evacuate immediately.
• Oil loading at UAE’s Fujairah suspended after the port was hit, Bloomberg sources report.
• UAE’s Fujairah port was hit and the damage is being assessed, Bloomberg reported citing sources.
• Multiple locals are said to confirm smoke rising in the vicinity of Dubai International Airport, but it is unclear what has been targeted, according to Faytuks News.
• Explosions heard in Bahrain’s skies as air defences intercept an Iranian attack, according to Sky News Arabia.
• Missile bombardment targets US military base for logistical support at Baghdad airport, according to Al-Haddath.
• The meeting of European foreign ministers will discuss the protection of sea lanes and the Strait of Hormuz, Al Jazeera sources report.
• Russia’s Kremlin says we are open to continuing Ukraine negotiations and that US President Trump has not lost interest, instead he recommended Ukrainian President Zelensky make a deal

US Event Calendar

 

DB’s Jim Reid concludes the overnight wrap

After Friday’s revelation that it was the first consecutive monthly Friday 13th for 11 years, today’s nearly-as-impressive revelation is that this week sees the Fed, ECB, BoJ and BoE all meet in a single calendar week for the first time since December 2021. So a “super week” for central banks. All of them will have a very complex backdrop to deal with, shaped by geopolitical risk, volatile energy prices, and unsettled inflation dynamics.

Clearly the Middle East is the centre of attention for markets right now, and as we go to press this morning, the market turmoil is showing no sign of easing. Brent crude oil prices are up another +1.65% to $104.84/bbl, building on their +42% rise over the previous two weeks since the strikes began. Moreover, that’s actually beneath the overnight highs, as Brent had been as high as $106.50/bbl when markets reopened on Sunday night.

The latest gains for oil follow the news late on Friday (after the US close) that the US had conducted bombing raids on Kharg Island. That’s particularly significant because around 90% of Iran’s crude exports are shipped from there. For now, Trump said in a post that he’d chosen not to destroy the oil infrastructure, but he also said he’d reconsider that if Iran interfered with ships’ passage through the Strait of Hormuz. So markets are still concerned about further escalation, and with each passing day investors have moved to price in a more protracted conflict. For instance, 6-month Brent futures are up another +0.33% this morning at $85.94/bbl.

In the meantime, there’s also been no sign of the two sides moving towards negotiations. For instance, Trump said to NBC on Saturday that “Iran wants to make a deal, and I don’t want to make it because the terms aren’t good enough yet”. However, on the Iranian side, their foreign minister Abbas Araghchi said “We don’t see any reason why we should talk with Americans”. So the rhetoric has only added to the fears about an extended conflict and a sustained period of high oil prices.

When it comes to oil prices, all eyes are still on the Strait of Hormuz, and when that will begin to reopen. Interestingly, the WSJ reported last night that the Trump administration would announce plans this week about a coalition of multiple counties that would escort ships through the Strait of Hormuz. However, the report also said it was still under discussion whether it would start before or after the hostilities actually ended. So clearly that’s one we need to get the details on.

Overnight in Asia, we’ve seen a mixed performance across the major equity indices. Most have fallen back, including the Nikkei (-0.45%), the Shanghai Comp (-0.32%), the CSI 300 (-0.25%) and the S&P/ASX 200 (-0.39%). However, South Korea’s KOSPI is up +0.72%, and in Hong Kong the Hang Seng is up +1.30%. Looking forward as well, futures on the S&P 500 are up +0.50%, signalling a pickup from Friday’s close, when the index hit its lowest since November.

Meanwhile, the Chinese activity data for February has also been stronger than expected overnight. For instance, industrial production is up +6.3% on a year-on-year basis over the first two months of the year (vs. +5.3% expected), and retail sales also beat expectations at +2.8% (vs. +2.5% expected). However, given the strikes on Iran began on February 28, we’ll have to wait for the March and April releases to get a better sense of how that’s impacting the data.

Whilst the conflict is set to dominate the week ahead, we do still have those four big central bank meetings, where all eyes will be on their reaction functions to the war’s impact and the latest oil shock. Starting with the Fed, our economists expect them to keep rates unchanged this week (see their full preview here) and think they’ll emphasise elevated geopolitical uncertainty. They only expect minor statement tweaks, including smoothed language on recent labour data (especially given January and February’s conflicting payrolls) and a nod to geopolitical risks, highlighting uncertainty and near-term upside pressure on inflation. Then at the press conference, they think Chair Powell is likely to stress that recent events mainly transmit through financial conditions—particularly oil prices. For now, however, our economists think he’ll avoid signalling any meaningful shift in the near term policy outlook.

For the Fed, an important consequence of the conflict is that higher energy prices have begun to feed into inflation assumptions. So our economists have nudged up their headline inflation estimates for this year, and they expect Fed officials to reflect a similar adjustment when they publish their updated Summary of Economic Projections. Indeed, core PCE inflation has registered back-to-back 0.4% monthly increases now, pushing the year-on-year rate to 3.1%, the highest since early 2024. For the dot plot, our economists are still expecting it to signal one rate cut this year, although it wouldn’t take much to shift the median dot for 2026. Clearly though, the outlook is going to remain heavily dependent on the oil price. For example, our economists have found that a sustained oil price around $100/bbl would still see the projected tax benefits to consumers from the One Big Beautiful Bill Act outweigh the drag from higher effective energy costs (see here). However, a move toward $150/bbl would pose a more material risk to consumer spending and the broader outlook.

Beyond the Fed, this week’s incoming data is unlikely to materially alter the tone of the meeting. Our economists expect February’s industrial production today to rise by 0.3%, slower than January’s 0.7%, largely due to softer utility output, though oil and gas extraction will be worth monitoring. Otherwise, the regional manufacturing surveys from New York and Philadelphia could reflect some drag from geopolitical uncertainty, with particular attention on capital spending components. And given the recent labour market volatility, Thursday’s initial jobless claims will take on added importance as they fall within the March employment survey window.

Away from the US, this Thursday will bring the ECB, BoE and BoJ meetings, with our economists expecting all three to leave rates on hold, with the emphasis firmly on guidance rather than action. At the ECB, our economists expect the Governing Council to acknowledge heightened uncertainty and near-term upside risks to inflation, while stopping short of explicitly flagging medium term risks. They also expect a strong reiteration of policy flexibility and a clear message underscoring the ECB’s unwavering commitment to price stability, with officials keen to signal that they stand ready to act to avoid a repeat of the 2022–23 inflation episode. See their full preview here.  

Then in the UK, our economist thinks the MPC will lean into a dovish wait and see stance amid a more clouded outlook following the Iran related energy shock. He expects a less divided vote than in February, with the majority favouring an unchanged Bank Rate, while two members continue to favour a cut. Although our economist still sees two rate cuts this year, recent developments have pushed back the expected timing. For more info, see the full preview here.

Over in Japan, our economist expects the BoJ to maintain its current stance, with attention focused on Governor Ueda’s press conference. While underlying fundamentals could justify an early hike, elevated oil prices and growth risks are likely to temper near term action, and sustained crude prices above $100/bbl would reduce the likelihood of an April move. His full preview is here. Meanwhile, other central banks making decisions this week include the RBA (Tuesday; our economists expect a hike), the BoC (Wednesday), the SNB and the Riksbank (Thursday). The latter three are widely expected to see no change in rates.

Finally this week, notable data includes Germany’s Zew survey for March tomorrow and UK labour market data due Thursday. In the geopolitical sphere, President Trump and Japanese PM Takaichi are meeting in Washington, with defence cooperation expected to be the primary topic (see more in our Chief Japan economist’s week ahead here). In Europe, this week’s events include an EU leaders’ summit (Thursday to Friday). And on earnings, the lineup includes Micron, FedEx and Lululemon in the US as well as Tencent and Alibaba in China. See the day-by-day calendar of events at the end as usual for more.

Recapping last week now, the market moves were clearly dominated by events in the Middle East, with oil prices jumping as the conflict showed no sign of ending. So that left Brent crude up +11.27% (+2.67% Friday) at $103.14/bbl, whilst WTI was up +8.59% (+3.11% Friday) at $98.71/bbl, even as the highs for the week actually happened early Monday morning in Asia. Investors were particularly concerned by an extended closure of the Strait of Hormuz, and there were notable rises for oil futures further out the curve as well, as investors increasingly priced out a swift end to the disruption. So the 6-month future was up +12.31% (+1.47% Friday) to $85.66/bbl, marking its biggest weekly jump since 2022. However, there was a bit of pullback in natural gas prices, with front-end European futures down -2.82% last week (+0.57% Friday) to €50.75/MWh.

Although the most direct moves were in the oil price, the effects cascaded across other asset classes as investors priced in a stagflationary shock. For instance, there was a clear reaction in central bank pricing, as speculation mounted about a hawkish response. So by the end of the week, markets were pricing 47bps of ECB rate hikes by the December meeting, with a rate cut fully priced in by the July meeting.

Meanwhile for the Fed, the amount of cuts priced by December’s meeting fell from 44bps to just 24bps.
That repricing had a clear effect on sovereign bonds, which suffered steep losses. In fact, the 10yr bund yield was up +12.2bps (+2.3bps Friday) to 2.98%, marking its highest level since July 2011 during the Euro crisis. Moreover, the 2yr German yield rose +13.1bps (+2.4bps Friday) to an 18-month high of 2.43%. It was a similar story for the US as well, where the 10yr Treasury yield rose +13.8bps (+1.5bps Friday) to 4.28%, its highest level since January.

All this proved a tough backdrop for risk assets, with equities losing ground around the world. So the S&P 500 fell -1.60% (-0.61% Friday) to its lowest since November, whilst Europe’s STOXX 600 fell -0.50% (-0.47% Friday), and Japan’s Nikkei was down -3.24% (-1.16% Friday). There was also a decent move wider for credit spreads, with US IG spreads up +9bps last week, marking their biggest weekly jump since the Liberation Day tariffs were announced last April. Meanwhile US HY spreads were up +15bps, Euro IG up +7bps, and Euro HY up +22bps.