Ceasefire Prospects Keep Oil Steady

In focus today

In the UK, February GDP is expected to increase 0.1% m/m, an increase from January’s 0.0% m/m growth. The print is especially interesting in the light of Tuesday’s IMF projections that UK GDP is forecasted to grow 0.8% y/y in 2026, a downward revision from 1.3% y/y and the hardest hit of the G7 countries on a per capita basis.

In the afternoon, the US March industrial production and manufacturing production are released, and both are expected at +0.1% m/m, a decline from +0.2% m/m in February.

In Sweden, focus is on SPES monthly labour market statistics and a speech by Riksbank’s Per Jansson at 13:15 CET on current monetary policy and the economy. We expect a repeat of his relatively dovish stance as expressed in the minutes from the last meeting, not least as inflation has surprised on the downside and inflation expectations remain well anchored.

In the eurozone, final March inflation figures are released and expected to confirm flash estimates.

Economic and market news

What happened overnight

China released its monthly batch of data overnight, which continued to show a two-speed economy with weak consumer demand and strong exports/production. GDP increased 5.0% y/y in Q1 above expectations of 4.8% y/y, and industrial production beat expectations at 5.7% y/y (cons: 5.3% y/y) lifted by strong export growth. Retail sales for March disappointed growing only 1.7% y/y from an average of 2.8% y/y in the first two months of the year. The main good news came from house prices that fell -0.21% m/m, less than what we have seen lately, while the unemployment rate increased from 5.3% in February to 5.4% in March, the highest level since February last year. The 5% GDP growth will give some comfort to policymakers in Beijing, but they will stand ready to provide economic stimulus over the coming quarters if the hit from the Iran war, to both exports and domestic demand, starts to get stronger. The numbers added to the positive risk sentiment in Chinese stocks overnight and the CNY strengthened slightly.

What happened yesterday

In the Middle East, Israel’s cabinet is discussing a potential ceasefire deal with Lebanon, which could be announced soon according to Lebanese officials. Ending the Lebanon conflict is seen as important for broader peace talks between the US and Iran. However, as Hezbollah is not part of the talks, it remains unclear if the group would comply with a ceasefire. US-Iran talks may resume in Pakistan this weekend after previous discussions stalled, although no date has been set yet. The Trump administration expressed optimism on Wednesday about resolving the conflict; President Trump stated in an interview with Fox news that the Iran war is “almost over”. That is despite enforcing a shipping blockade, that so far appears to have made nine ships turn around in the Strait of Hormuz and as traffic through the Strait remains subdued compared to pre-war levels.

Oil kept steady yesterday at around USD 95/bbl as markets continued its optimism that the resumption of talks between the US and Iran will lead to an eventual reopening of the strait and normalisation of the supply situation.

In the US, Kevin Warsh’s hearing in the Senate has been set for 21 April. While the hearing is an important step in the process to be confirmed as Fed chair, the sticking point remains Republican Senator Tillis’ opposition to vote for his approval as long as an ongoing criminal investigation into Powell over cost overruns at the Fed’s headquarters continues. Polymarket sees about a 60% chance that Kevin Warsh is confirmed before Powell’s term ends in May. If Warsh has not been confirmed by then, Miran might be appointed acting Fed chair, while Powell may continue to serve as FOMC chair as his position on the board of governors runs until 2028.

In Denmark, the EUR/DKK spot rate briefly reached 7.4732 yesterday, the level that previously triggered intervention by Danmarks Nationalbank, putting the upper end of the peg to the EUR back in focus. While markets currently price a roughly 50% probability of a 10bp independent rate hike by Danmarks Nationalbank this year, we believe it is more likely that liquidity developments will ease the pressure on the DKK.

Equities: Equities continued moving higher, with the S&P 500 setting a fresh all-time high. However, market breadth was weak. The S&P 500 closed up 0.8%, while the Stoxx 600 ended 0.4% lower. Additionally, most sectors in the US were actually down, although heavyweight tech continued to outperform. Tech surged 1.6% yesterday, marking a three-percentage point outperformance compared to US industrials. Software alone rallied 4.4%.

FI and FX: The USD underperformed vs all G10 peers yesterday, although changes are generally quite modest. EUR/USD still hovers around 1.18. USD/JPY trades at just 159 while GBP/USD has moved closer to 1.36. In Scandies, the NOK rose throughout the day bolstered by risk-on. EUR/NOK has returned to levels just above 11.00. EUR/SEK defied positive risk sentiment throughout the European session, which could have been related to repatriation flows. In the US and Asian sessions, however, EUR/SEK followed the script and slipped below 10.80. There have been modest movements in global bond yields and swaps as the market eye an extension of the ceasefire between US and Iran. UST10y trades at 4.27%.