In focus today
February flash inflation. Our forecast shows CPIF excluding energy at 1.41%, CPIF at 1.75%, and CPI at 0.52% y/y. See inflation preview here. Electricity prices were high in February, and we expect them to be nearly unchanged compared to January, before decreasing now in March. The recent developments in gas and oil are likely to contribute to slightly higher CPIF and CPI going forward, but so far, the impact on Swedish inflation appears to be moderate.
In the US, weekly jobless claims and flash Q4 productivity data are up for release. The latter will likely show cooling growth in line with the weaker-than-expected flash GDP release earlier and following Q3’s sharp productivity acceleration (+4.9% q/q AR), which slowed unit labour cost growth to -1.9% q/q AR (+1.2% y/y).
Economic and market news
What happened over night
In the US, the Senate rejected a resolution seeking to limit President Donald Trump’s authority to conduct military operations against Iran. The measure failed 47-53, with only limited Republican support. The outcome indicates that congressional Republicans are not ready to challenge the administration’s military actions, suggesting minimal political constraints on US operations in the near term. The legislation is set to be voted on in the House today, where it is expected to face significant challenges.
China’s National People’s Congress opened with a 4.5-5% growth target for 2026 and plans to boost spending on defence and research, signalling a sustained strategic shift towards technology-driven growth. Premier Li Qiang highlighted the importance of innovation and industrial upgrading to address US trade pressures and subdued domestic demand, reinforcing Beijing’s commitment to long-term technological self-reliance.
What happened yesterday
In energy markets, energy prices stabilised despite escalating Middle East tensions, as the conflict widened beyond the Gulf after a US submarine sank an Iranian warship off Sri Lanka and NATO intercepted a missile headed for Turkey. Weekly US oil inventory data showed no purchases for strategic reserves last week, though the US may consider selling reserves if oil price pressures persist. During a press conference, the White House stated it could not provide a timeline for securing shipping routes through the Strait of Hormuz, though naval escorts remain under consideration. Brent crude settled at 81.40 USD/bbl while European natural gas prices declined despite heightened Middle East tensions, closing at 47.3 EUR/MWh, down 13.15% d/d.
US and tech, President Donald Trump and major tech companies, including Amazon, Google, Microsoft and Meta Platforms, signed the “Ratepayer Protection” pledge. The initiative aims to prevent surging power demand from AI infrastructure from driving up household electricity prices, which have already risen by about 6% in 2025 With energy costs becoming a key campaign issue ahead of the midterm elections, the pledge seeks to address growing political pressure. However, implementation remains uncertain due to the decentralised and state-regulated nature of the US power market.
In the euro area, unemployment fell to a record-low 6.1% in January from 6.3% in December, with a decline of 184k unemployed, primarily in Italy, Spain, and France. While this signals a hawkish tilt for the ECB, frequent revisions to the data suggest caution in interpreting the sharp drop. We anticipate a more gradual decline in unemployment in 2026 as labour demand has cooled, though employment growth is likely to continue in Southern Europe, particularly Spain. Meanwhile, the final euro area PMI for February confirmed 51.9, with services slightly revised up to 51.9 and manufacturing steady at 50.8, signalling moderate growth.
In the US, the ADP national employment report showed a gain of 63k private sector jobs in February, aligning closely with consensus estimates and ADP’s weekly projection (+50k). January’s figures were revised down by -11k. Education and health care led job growth (+58k), continuing trends seen throughout 2025. The report is unlikely to move markets significantly. Meanwhile, the ISM non-manufacturing new orders index rose sharply to 58.6 in February from 53.1 in January, indicating robust service sector activity. Notably, the prices index declined (63.0; prev. 66.6), suggesting manufacturing cost pressures stem mainly from tariffs rather than broader inflationary factors.
In Switzerland, February inflation slightly exceeded expectations at 0.1% y/y (cons: 0.0%), with core inflation at 0.4% (prior: 0.5%), aligning with the SNB’s Q1 forecast. Inflationary pressures remain subdued and should keep the SNB on its toes for the time being. This is only further amplified by the recent strengthening of CHF.
In Norway house prices fell 0.3% m/m s.a., significantly below Norges Bank’s forecast of a 0.6% increase. This is not the determining short-term driver of monetary policy, but it does suggest some more caution amid reduced outlook for rate cut.
In Sweden, the services PMI unexpectedly fell to 48.3 in February from 53.8 in January, driven by a notable drop in business volume and new orders. It is too early to determine whether this decline is temporary or signals a more sustained trend. The weakness in services also pulled the composite PMI down to 50.5 from 54.4 in January.
Equities: Global equities rebounded through yesterday’s session as the news flow from Iran evolved during the day. Despite mixed and at times contradictory headlines, particularly regarding Iran’s willingness to negotiate, Western markets ultimately closed higher across both North America and Europe. This stood in sharp contrast to the heavy losses seen earlier in Asia and Japan yesterday.
Looking at the broader picture, however, the recent volatility has not translated into dramatic moves on a global aggregate level. Over the past five sessions global equities are down roughly 2.5%, while cyclicals have underperformed defensives by around 1pp.
Given the magnitude of the geopolitical shock originating from Iran, the relatively contained reaction across risk assets reflects that markets continue to frame the conflict primarily through the lens of energy supply risk, specifically the potential disruption of oil and gas flows through the Strait of Hormuz. So far, the broader macro-financial transmission channels remain limited.
This morning, Asian equities are trading higher, led by an extraordinary rebound of more than 10% in South Korea. As we highlighted yesterday, these markets currently display significant exuberance, and in such an environment even relatively small pieces of news can trigger outsized moves. This is why we wrote about getting caught wrong-footed yesterday and why we see many investors moving very close to benchmark.
This morning we have both European and US futures are modestly lower.
FI and FX: There was stabilisation in the market yesterday with European bond yields declining and corporate bond spread stabilising even though US bond yields rose in the afternoon after better than expected US economic data supported the equity market but also send US Treasury yields modestly higher. This morning, we have seen a rise in government bond yield across the Asian markets.
Energy prices stabilized yesterday amid a still tense situation in the Middle East. The weekly US oil inventory data showed that the US again did not buy for its strategic reserves last week ahead of the start of the military campaign. If pressure on oil prices does not start to ease, the US would likely consider selling strategic reserves. That will not be able to replace the oil shut in behind the Strait of Hormuz though but can help contain prices.
