Markets
Oil prices grinded back above triple digit numbers yesterday with so far little progress seen in peace talks and traffic in the Hormuz Strait down to nearly zero as Iran is forcing its blockade through actual vessel seizures. Fox News contradicted the indefinite extension to the ceasefire, citing a White House official that it would only last for an additional three to five days. White House press secretary Leavitt later dismissed the Fox News report though. Meanwhile, Iran has shown little intention of taking part in negotiations short term as long as the US naval blockade and threats persist. The semi-official Tasnim news did cite the country’s envoy to the UN in saying Iran “received some sign” that the US is ready to break the blockade. Either way, markets remain on edge with oil prices this morning suddenly popping to $106 before easing back to $103 currently. European stock markets traded defensively but Wall Street shrugged at the renewed oil price rise with gains varying between 0.7-1.6%. Treasuries and Bunds lost some ground. US yields rose 0.4-2.2 bps. German rates added 3.5 bps at the front. Core bonds by now have mostly undone Friday’s gains. The dollar held the upper hand against most major peers. EUR/USD retreated towards 1.17. DXY has bottomed out around 98 and is now closing in on 99. USD/JPY marches higher for a fourth day straight with the 160 barrier just inches away.
April PMIs today offer a distraction from the day-to-day geopolitical developments. Japan kicked off this morning with a softer and modest increase in private sector output in April. Services reported weaker growth (51.2 from 53.4) but manufacturing signalled the steepest rise in output for over 12 years amid a solid uptick in new work. There were reports of the industry sector ramping up production over fears for further supply chain disruptions (inventory building) linked to the Middle East conflict. The latter also drove input prices rising at the quickest since January 2023, in turn boosting output inflation to its fastest pace since data were first available in 2007. We’ll be looking for similar signals in the UK and European edition later today. The bar for the European manufacturing gauge is at 50.9, easing from April’s 51.6. Services is expected at 49.8 from 50.2. Combined private sector activity would stagnate around 50.1. The key message will come from the price series. The likes of the ECB will monitor the impact of higher oil prices filtering through to the rest of the economy and pushing up general inflation. These subseries could prove more important in determining the market reaction, particularly for bonds. The recent string of ECB speeches (most notably from president Lagarde herself) took April off the table for a first hike, putting the spotlights on June. Overall sentiment obviously remains at the whim of the Iran-headline roulette.
News & Views
New EU car registrations increased by 4% in Q1 2026 vs Q1 2025 thanks to strong performance in the month of March (+12.5% Y/Y). Consumer activity was bolstered by new and revised tax benefits and incentive scheme across major European countries. Hybrid-electric vehicles (HEV) lead as the most popular power type choice among buyers (38.6% in Q1 from 35.6% in Q1 2025), while the battery-electric (BEV) car market share reached 19.4% up from 15.2%. Meanwhile, plug-in hybrids continued to strengthen their position (9.5% from 7.6%), underlining the importance of a technology-neutral pathway to decarbonisation. The combined market share of new registrations for petrol and diesel cars fell from 38.2% to 30.3%. In Belgium, new registrations declined by 5.9% to 113 805 compared with Q1 2025. Especially sales of plug-in hybrids and diesel cars took a hit. Petrol cars (44.4% from 42.1%), BEV’s (34.7% from 33.4%) and HEV’s (12.2% from 12.3%) account for the lion share of new registrations.
South Korean GDP growth reached a consensus-smashing 1.7% Q/Q-pace in Q1 (vs 0.9% estimate). Apart from Q3 2020 (+2.2%), it was the fastest increase in economic activity since 2010. Compared with Q1 of last year, GDP rose by 3.6%. Details showed an AI-fueled export boom being the biggest growth driver. Exports rose by 5.1% Q/Q with net exports adding 1.1 ppt to growth (imports +3% Q/Q). Private consumption increased by 0.5% Q/Q with government spending rising by 0.1%. Investments picked up pace as well (+2.9% Q/Q) driven by funds into construction and facilities. Today’s strong GDP numbers might even underestimate growth momentum as gross domestic income surged by a whopping 7.5% Q/Q.
