In focus today
Focus continues to be on tensions in the Middle East, keeping oil markets and risk sentiment on edge.
Swedish inflation tops the domestic agenda, where we expect core inflation at 1.5% whilst higher energy prices will push CPIF up to 2.2%, from previously 1.7%. Compared to our previous forecast, the inflation path has been revised upwards, reflecting our view that traffic through the Strait of Hormuz will remain subdued for an extended period, exerting pressure on supply chains. Note that as this is the flash inflation print, we will not receive any details but must wait another week for them. Additionally, we also receive services, and composite, PMIs today.
In the euro area, final services PMI and composite PMI for March will be released. The flash estimate showed the composite PMI declining to 50.5 from 51.9 in February, while the services PMI fell to 50.1 from 51.9, indicating near-stalling growth in the sector.
In Denmark, Danmarks Nationalbank’s press release on March FX reserves will be published in the afternoon, revealing whether the central bank intervened in the FX market in March.
Overnight, we expect the Reserve Bank of New Zealand (RBNZ) to keep its monetary policy unchanged in line with market pricing and consensus. Markets expect RBNZ to hike rates most likely in Q3 this year.
For the rest of the week, developments in the Iran war will continue to be the main market driver. Furthermore, from the US, we will look out for the minutes from the FOMC’s March meeting released on Wednesday evening, and both February PCE and final Q4 GDP figures released on Thursday. Friday will bring flash inflation figures for March from China, Denmark, Norway and the US.
Economic and market news
What happened since Wednesday
The US-Iran conflict escalated further on Monday as Iran rejected a US ceasefire proposal brokered by Pakistan, which called for an immediate halt to hostilities followed by broader peace talks to be concluded within 15 to 20 days. Instead, Iran issued a response consisting of 10 clauses, demanding a permanent end to the war with the US and Israel, the lifting of sanctions, and safe passage through the Strait of Hormuz. President Trump dismissed the Iranian response and issued a stark warning threatening massive strikes if his demands for Iran to reopen the Strait of Hormuz are not met by Tuesday evening. Trump has repeatedly threatened strikes on Iranian energy and transport infrastructure, while experts have noted that strikes on civilian infrastructure, such as power plants and bridges, would constitute war crimes. At the time of writing, Brent crude prices have risen to 111 USD/bbl as markets assess the risks to global energy supply.
In the US, Friday’s March jobs report came in stronger than expected, with payrolls growing by 178k (cons: +65k, Danske: +30k), while the unemployment rate fell to 4.3% (cons: 4.4%, Danske: 4.5%). However, February’s figures were revised down further to show a decline of 133k jobs instead of 92k. Average hourly earnings growth eased to 0.2% from 0.4% in February, and the average work week dipped slightly to 34.2 hours from 34.3. Despite these softer details, the overall report was robust, reflecting a rebound from February, which was affected by bad weather and a nurses’ strike. Importantly, the data primarily reflects the second week of March, so the impact of the Iran conflict and surging oil prices is not yet visible. However, recent indicators, including a decline in job postings and softer employment in the March PMI, suggest potential headwinds for the labour market in the months ahead.
US February retail sales also surprised to the upside, with headline growth at 0.6% m/m SA and core retail sales (control group) rising by 0.5% m/m SA. However, the February retail sales data do not yet reflect potential sentiment effects from the ongoing conflict in Iran. The ISM manufacturing report for March also revealed notable developments, with the prices paid index surging to 78.3 (cons: 73.0, prior: 70.5), while new orders declined to 53.5 from 55.8 in February. The ISM services PMI also disappointed, falling to 54.0 in March (cons: 54.9, prior: 56.1). The prices paid component jumped to 70.7, the highest since October 2022, likely reflecting inflationary pressures from both the Iran conflict and lingering tariff effects.
Also in the US, St. Louis Fed President Musalem (non-voter) stated on Wednesday that the current policy stance remains appropriate despite rising inflation risks tied to the Middle East conflict. He warned that persistent supply shocks could have a lasting impact on inflation expectations and highlighted the need to closely monitor core inflation
In the euro area, unemployment rose slightly to 6.2% in February from 6.1%, driven by a 137k increase in unemployed persons. The modest uptick is not a clear dovish signal for ECB given the data’s monthly volatility and earlier revisions. Despite the February increase, the number of unemployed persons remains below end-2025 levels.
In Sweden, March manufacturing PMI rose to 56.3, but the details revealed signs of supply disruptions. Delivery times increased significantly, contributing most to the higher PMI, though the rise likely reflects supply chain issues rather than stronger demand. Input prices also surged to their highest level since October 2022, driven by higher energy costs and global price pressures tied to the Middle East conflict. Furthermore, new orders fell sharply.
In South Korea, Samsung Electronics reported record Q1 operating profit of 57.2 trillion won, which represents nearly triple its previous record and exceeds its entire 2025 profit. The chipmaker’s semiconductor division generated 95% of total profit as supply shortages from AI data centre requirements constrained traditional chip availability while soaring AI chip demand has pushed up memory prices over 50%.
Goldman Sachs’ private credit fund defied industry-wide redemption pressures with withdrawal requests of just under 5% in Q1, staying below its quarterly cap, while the broader private credit industry faces surging withdrawals. The outperformance comes as fears over AI disruption eroding software companies’ earnings and loan repayment ability have rattled the sector, prompting several asset managers to cap redemptions at 5%.
Equities: Equity markets traded broadly sideways over the Easter period in the regions that remained open, following the rebound seen into the holiday. Importantly, this does not change the bigger picture: global equities are still ~4% above the recent lows, reflecting a market that is increasingly pricing when – not if – we get a de-escalation in the Middle East.
The underlying assumption remains that a ceasefire and/or broader stabilization would imply a partial (if not full) reopening of the Strait of Hormuz, easing constraints on global energy supply. This view is increasingly supported by a pick-up in bilateral agreements, particularly between Asian economies and Iran, allowing some oil flows to resume via alternative arrangements. Cyclicals have, not surprisingly, outperformed from the lows. More notably, however, volatility has declined across regions and asset classes, reinforcing the notion that investors are trying to look through the near-term noise. Markets in the US edged higher yesterday, while Asian trading this morning is mixed. European futures are slightly firmer, catching up with US moves, whereas US futures are marginally softer.
FI and FX: With most of Europe off for Easter, yesterday saw choppy price action amid thin volumes across the FX market. NOK outperformed within G10 and EUR/NOK retraced all of Friday’s gains and is now back at 11.20. On the other end of the scale, we find the SEK, that continues to underperform. EUR/SEK was rejected at support around 10.85 and is back trading above 10.90 to start this morning. US yields have remained relatively stable over the Easter period, and EUR/USD held resistance at 1.1570 yesterday, and looks to start the day with a move to the lower 1.15’s.
