In focus today
Focus remains on tensions in the Middle East and its impact on energy markets.
In Germany, we will receive the ZEW survey data for March. Recent months have shown an improvement in the assessment of the current economic situation, though expectations for the future slightly declined in February. It will be interesting to observe how ongoing conflict in the Middle East impact the survey results, amidst the narrative of a recovering German economy.
This morning at 9:30-10:15 CET, we are hosting a 45-minute webinar on the Trump-Xi summit in Beijing. We discuss the path ahead for the two countries, implications for Nordic businesses as well as USD and CNY.
Economic and market news
What happened overnight
Overnight, the Reserve Bank of Australia raised its cash rate as expected by 25bp to 4.1%. Markets had priced in roughly a 75% probability of a hike ahead of the meeting. This was RBA’s second rate hike in a row, but unlike the previous decision (which was unanimous), this morning’s hike was made with the smallest possible vote majority (5-4). The statement and Governor Bullock’s comments both underscored that while higher oil prices and consequently higher short-term inflation expectations played a role in the decision, it was primarily motivated by growing domestic capacity pressures.
Between the US and China, Trump requested to delay his planned 31 March-2 April trip to China by about a month due to the ongoing Iran war. The delay risks increasing tensions between the US and China, already strained by trade, Taiwan, and the Middle East crisis.
What happened yesterday
The conflict in the Middle East continues, with Iran successfully targeting oil and gas production facilities. In the UAE, Iran hit the Shah gas field in a drone attack, while they caused a fire in the Fujairah Oil Industry Zone. Additionally, a tanker near the port of Fujairah was reported struck whilst at anchor at sea. Meanwhile, Israel announced on Monday that it has detailed plans for at least three more weeks of war, continuing its strikes on sites across Iran and Lebanon.
The oil price has traded above the USD100/bbl level so far this week. Iran hit a UAE gas field as its retaliation seems to target energy infrastructure to a greater extent. That increases the risk that energy prices will rise more and stay high even if traffic through Strait of Hormuz resumes.
In geopolitics, European nations responded to President Trump’s threats of a “very bad” future for NATO if members failed to aid the US in the Strait of Hormuz. While nations supported diplomatic efforts, they rejected military involvement. The UK, Germany, Japan and France ruled out sending vessels, with German Chancellor Friedrich Merz emphasising that NATO is “not an intervention alliance”.
In Canada, CPI increased 1.8% y/y in February, slightly below expectations and an easing from January (cons: 1.9%, Jan: 2.3%). Energy prices were a key drag, with gasoline falling 14.2% y/y and natural gas down 17.1% y/y. The slowdown may also be attributed to base effects, as February 2025 experienced elevated price increases due to the mid-month expiration of the goods and services tax and harmonised sales tax holiday. The low inflation figures mark a six-month low and may support the Bank of Canada in keeping rates steady on Wednesday.
In Switzerland, recent sight deposit data showed no indication of intervention by the Swiss National Bank (SNB). EUR/CHF reached its lowest level since 2015 last week, breaking firmly below 0.90 as verbal intervention failed to meaningfully support the cross. We look ahead to the SNB meeting on Thursday, where we expect the policy rate unchanged at 0%, in line with consensus and market expectation.
In the US, industrial production increased 0.2% m/m in February, a decrease from January (0.7% m/m). On a yearly basis industrial production increased 1.4% y/y (Jan: 2.3% y/y). Manufacturing makes up the largest share of industrial production and surveys have shown signs of improving sentiment, but the ongoing US-Israeli conflict with Iran, resulting in higher oil prices, poses a risk to recovery.
Equities: Global equities had a solid session yesterday, rising about 0.9%. S&P500 rose 1%, with all 11 sectors in green, led by IT and consumer discretionary. 11 sectors being up on the same day has happened only three times the past six month, most recently in the aftermath of the Greenland situation. This tells us that part of the move is to be explained in the ‘reversal’ pattern. Unsurprisingly, cyclicals outperformed defensives in this risk-on tone. Nasdaq rose 1.2%, Russell 2000 0.9% and Stoxx600 0.4%. Overnight, Asian stocks are in green rising, while US futures are about 0.2% lower.
FI and FX: Overnight, the RBA delivered a rate hike from 3.85% to 4.10%, in a 5-4 split vote. The market interpreted the decision as dovish with falling yields, while the AUD has pared initial losses. Oil prices declined during yesterday’s session, but prices are higher overnight with Brent oil around 103 USD per barrel as Iran has stepped up attacks on energy infrastructure. Japan’s finance minister Katayama said the recent JPY weakening, where USD/JPY on Friday was at the highest level since 2024, is not in line with fundamentals and hinted at possible intervention. With the Scandinavian macro calendar empty today, Scandinavian markets will take their cues from global developments.
, this morning's hike was made with the smallest possible vote majority (5-4). The statement and Governor Bullock's comments both underscored that while higher oil prices and consequently higher short-term inflation expectations played a role in the decision, it was primarily motivated by growing domestic capacity pressures.){kind=link}