In focus today
Geopolitical tensions in Iran continue to dominate market sentiment, with uncertainty over how long the conflict and energy supply disruptions will persist. Investors will be watching closely for updates on the global release of strategic reserves, oil supply disruptions, geopolitical developments, and any further comments from the Trump administration.
Today’s most important data release will be the US February CPI. US gasoline prices were on the rise already before the war in Iran erupted, and we expect energy inflation to lift headline CPI by +0.3% m/m SA (2.5% y/y). Core inflation will likely remain more modest at +0.2% m/m SA (2.5% y/y) due to low housing contribution.
We will follow comments from ECB executive board member Schnabel, who is scheduled to speak today. As the silent period ahead of the March meeting begins tomorrow, both Guindos and Schnabel have the chance to offer key insights today.
Economic and market news
What happened yesterday
The pressure on oil prices has eased since Monday with the Brent crude trading around USD 86/bbl – down from USD 118/bbl on Monday. The easing comes as US President Trump suggested the conflict with Iran could soon de-escalate, alleviating fears of prolonged supply disruptions. Saudi Arabia is working to redirect some oil supply via pipeline to the Red Sea, while the IEA is rumoured to propose a strategic reserve release larger than the one following Russia’s invasion of Ukraine. Though neither solution offers a permanent fix, they could help stabilise markets until shipments resume through the Strait of Hormuz. Notably, Tuesday also saw some of the most intense airstrikes of the conflict. According to Reuters, Iran’s Revolutionary Guards said Tehran would not allow “one litre” of Middle Eastern oil to reach the US or its allies while attacks continue. Meanwhile, US Secretary of Energy Chris Wright briefly claimed on X that the US Navy had escorted an oil tanker through the Strait of Hormuz but later deleted the post. The White House later confirmed no such escort had occurred. The Pentagon reported destroying multiple vessels near the strait, including 16 minelayers, and issued another warning to Tehran against deploying explosives in the area.
In Norway, February core inflation fell to 3.0% y/y from 3.37% in January, aligning with analyst consensus but exceeding Norges Bank’s December projection of 2.6%. Headline inflation registered at 2.7% y/y, slightly above Norges Bank’s forecast of 2.6%. Details revealed corrections to January’s sharp jump in services ex. rent, which were largely one-offs. Overall, the release provides relief after last month’s inflation surprise, with little evidence of core inflation accelerating further. While hikes now appear less likely, views on the probability of rate cuts will probably diverge. We see a cut in September as the most likely scenario.
In the US, NFIB’s small business optimism index remained fairly steady in February (98.8; Jan. 99.3). Firms reported slightly lower uncertainty, improving business outlook and modestly lower price plans. Hiring plans declined, but at the same, realized employment changes were more positive than before. Similarly, ADP’s weekly private sector jobs estimate continued to show improving jobs growth at 15.5k per week, up from 12k two weeks earlier.
In Sweden, January’s consumption indicator stabilised at +0.7% m/m and +2.8% y/y, supported by broad-based growth across key aggregates. This followed December’s volatile figures (-3.7% m/m/+0.5% y/y) and stable retail sales performance. Meanwhile, the GDP indicator remained weak at -1.1% m/m and +0.6% y/y, reflecting declines in private sector production, particularly in construction and manufacturing, while services remained flat. New orders fell, as indicated by PMI data, primarily in the export industry but also domestically, though from high levels. Production data continues to be influenced by strong defence spending in Q4.
In Denmark, February CPI inflation edged lower to 0.7% from 0.8% in January. Food prices declined 0.3% m/m, continuing a downward trend, while rents saw their annual increase at 1.8% m/m, slightly higher than last year. Energy prices showed mixed developments, with electricity rising sharply by 8.8% as expected, but gas prices only increasing 5.2%, less than forecast.
Equities: European equities rallied yesterday, with Stoxx 600 up 2% and OMX Nordic nearly 3%, more than recouping Monday’s losses. US trading choppier, influenced heavily by the twists and turns in the oil price, and eventually closing somewhat lower (S&P500 -0.2%). US futures are somewhat higher today.
Within equities, tech leadership continued, and growth/momentum stocks did particularly well. This is interesting, as it is a trend shift from most of this year, with value outperforming growth with almost 10% YTD before the Iran attacks. It gets even more interesting considering that the US 10y even rose a few basis points yesterday. Tech, consumer discretionary and real estate were among the winners in the US session while defensives (utilities, health care) underperformed. Value cyclicals like banks and industrials were also weak.
Tech comeback is likely to continue today following a strong set of earnings from Oracle. Oracle has more than halved this year following massive AI capex programs, but they are sure monetizing it so far with cloud revenues growing 44% in the quarter. The moves in the oil price are still heavily impactful on markets, but with oil nearing 80 dollars, the impact from further declines will have less influence. As such, the recent tech appetite will be tested; whether Iran was a temporary distraction from the AI disruption theme or if this new leadership can be sustained.
FI and FX: Brent crude hit a new, recent low following reports that the US Navy escorted an oil tanker through the Strait of Hormuz, which were later denied. A decision on the IEA proposal is expected today, which would constitute the largest release of oil reserves in history, which could provide some temporary relief. EUR/USD remains about unchanged below 1.1650 from yesterday’s open. 2Y Bund yields declined about 6bp and 2Y US Treasury yields pulled back 2bp over yesterday’s trading session. The inflation print out of Norway matched analyst expectations at 3.0% y/y with details revealing few real surprises, with EUR/NOK ending the day largely unchanged. The SEK continues to trade with risk sentiment and after a very brief visit below 10.60 EUR/SEK climbed higher through the latter half of yesterday’s session, as sentiment softened somewhat. Turning to the data, we forecast today’s US February CPI at 2.5% y/y in both headline and core terms, slightly above consensus, but do not expect the release to significantly affect market pricing.
. Core inflation will likely remain more modest at +0.2% m/m SA (2.5% y/y) due to low housing contribution.){kind=link}