Markets
US markets rebounded at the start of trading on a WSJ report that president Trump was willing to end the war without reopening the Strait of Hormuz. He later indicated that the US will be leaving in 2-3 weeks with Defense Secretary Hegseth saying that the coming days of the conflict would be decisive. Trump will also deliver a speech tonight (9pm ET; 3am CET tomorrow) to give an important update on Iran. Yesterday’s risk rally only hit full pace after European close after the Iranian news agency (IRNA) reported that Iran’s president signaled readiness to end the war. He simultaneously reiterated Iran’s demands which haven’t changed from last week. They seek a complete halt of US/Israeli attacks on the country and against groups it back throughout the Middle East, pledges that history won’t repeat itself, war payments and reparations and sovereign right to exercise authority over the Strait of Hormuz. Yesterday’s risk rally pulled key US equity indices off the sell-off lows to rebound 2.5% (Dow) to 3.8% (Nasdaq) higher. US Treasuries recovered with the front and belly of the curve outperforming. US yields declined by up to 4.2 bps at the 5-yr tenor. US money markets now again err on the side of a Fed rate cut as a next move, attaching a 50% probability to such a scenario by year-end. From a data perspective, US consumer confidence (conference board) inched up in March as a modest improvement in consumers’ views of current conditions outweighed a slight downshift in expectations for the future. Consumers’ average (>6%) and median (>5%) 12-month inflation expectations surged in March to levels last seen in August 2025. The JOLTS job openings report printed near consensus with job openings again falling below 7mn. The German yield curve bull flattened with yields sliding by 0.5 bps (2-yr) to 4.6 bps (30-yr). Eurozone inflation accelerated to 1.2% M/M in March with the energy component up 6.8% M/M. The pace of core inflation stabilized at 0.8% (2.3% Y/Y from 2.4%). On an annual level, headline CPI rose from 1.9% to 2.5% with our in-house KBC Nowcast suggesting a further increase to 2.9% Y/Y in April. Depending on the evolution of the conflict, we might already hit 3%. On FX markets, the dollar sold off in yesterday’s risk rally with EUR/USD rebounding from the 1.1450 area towards 1.1550. Brent crude prices (June contract) fell from $107/b to $103/b after the Iranian president headlines. Today’s eco calendar contains (March) US ADP employment change, retail sales and manufacturing ISM, but the numbers will again be overshadowed by the developing narrative on the war in the Middle East. Asian stock markets join the risk rally this morning, but Brent crude currently treads water at the $103 level.
News & Views
The Bank of Japan’s quarterly Tankan business survey came in strong again. Sentiment among large manufacturers (17) improved to a four year peak while the sector’s outlook stabilized near the post-pandemic highs. Current conditions in the non-manufacturing segment (36) weren’t this benign in 35 (!) years. Its future looked bright too with the indicator only marginally retreating from 2025Q4 multidecade high (29). The image for small(er) companies looked similar. Price indicators picked up, hinting once again at growing inflationary pressures. Input pressures rose more than output, (partially) capturing the rising energy prices following the Iran war. But excluding the 2021-2022 inflation surge, the output price indicator is trading at its highest since the 1980s. Expectations for inflation in five years rose to 2.5%, another record. Meanwhile preliminary results of the shunto wage negotiations by the Japan’s largest union (Rengo) point at increases above the 5% mark for a third consecutive year. This combination makes an April rate hike by the Bank of Japan a near-certainty. Such a scenario is priced in for about 70% in money markets. The Japanese yen shrugged with upcoming rate support doing little to lift it. USD/JPY is trading more or less unchanged from yesterday’s close around 158.8.
Greece secured another milestone in its recovery from a debt crisis that nearly pushed the country out of the eurozone more than a decade ago. (Equity) index provider MSCI has upgraded Greece to a developed-market status from emerging market, reflecting “both the progress achieved by the Greek market authorities and the evolving view among global institutional investors that Developed Markets Europe operates as a cohesive investment region.” The win is a rather symbolic one that not necessarily would attract huge capital flows since other index providers already upgraded Greece last year. But it adds to Greece’s resurrection story, which also included upgrades to its sovereign debt market back to investment grade.
 improved to a four year peak while the sector’s outlook stabilized near the post-pandemic highs. Current conditions in the non-manufacturing segment (36) weren’t this benign in 35 (!) years.){kind=link}