In focus today
Today is a holiday in many markets and relatively quiet in terms of data releases. Focus remains on energy markets ahead of the close of the week, following yesterday’s volatile oil price movements.
In the US, we receive the April ISM manufacturing index, where markets expect a rise to 53.0 (prior: 52.7).
We also look out for the tier-2 releases of April PMI manufacturing indexes in the UK and US.
Economic and market news
What happened yesterday
Oil prices briefly surged to USD 126/bbl, the highest since March 2022, before retreating closer to USD 114/bbl towards the end of the session, which might be linked to the big swing in the Japanese Yen (see separate bullet). As the first oil future contract has moved from delivery in June to July the ‘spot price’ is now USD 111/bbl at the time of writing while the June contract ended at USD 114/bbl. Prices initially climbed on reports that President Trump was considering military strikes to break the negotiation deadlock with Iran. Iran said it would retaliate on US positions if US renewed attacks, the situation reflecting that efforts to resolve the conflict remain deadlocked. Markets remain sceptical of a near-term resolution to the conflict, with shipping data showing minimal traffic through the Strait of Hormuz and Polymarket investors assigning roughly a 20% probability that traffic in Hormuz strait returns to normal by end of May.
The ECB kept the deposit rate unchanged at 2.00% as widely expected. Lagarde refrained from giving firm guidance of the future rate path and stated that the ECB will have more information in June to take a decision, including new projections and scenarios. By extension, the market reaction was highly contained. We continue to expect the ECB to increase policy rates by 25bp in June and July, respectively. Our call was backed by an ECB sources story later in the afternoon saying that a June hike is very likely and that policymakers were in broad agreement about the need to move. For more details, read our ECB Review – An ocean of uncertainty, 30 April.
The Bank of England (BoE) held the bank rate steady at 3.75% as widely expected, presenting a scenario framework that suggests rate hikes could be appropriate but avoiding any pre-commitment. Markets responded by trading Gilt yields lower, with the June meeting now priced close to a 50-50 chance of a rate hike. The BoE appears cautious, and while risks are tilted towards one or two hikes, we believe the most likely outcome remains no changes. Read more in Bank of England Review – Active hold and no pushback on hawkish pricing, 30 April.
In the US, Q1 flash GDP grew 2.0% q/q AR which was less than expected by consensus (cons: 2.3%, Danske: 1.7%). The growth picture remains similar to last year, with steady but cooling private consumption and AI-related investments in data centres and software driving growth, while residential and non-residential investments remain under pressure. Meanwhile, the Q1 Employment Cost Index rose +0.9% q/q (prior: +0.7%), slightly exceeding expectations, primarily due to an increase in benefits rather than wages.
In the euro area, we received a long list of data. Flash HICP inflation rose to 3.0% y/y in April (prior: 2.6% y/y) in line with consensus, driven by higher energy inflation (10.8% y/y) and the largest monthly increase in food prices since last summer. Core inflation declined as expected to 2.2% y/y (cons: 2.3%, prior: 2.3%), and both services inflation and goods inflation momentum remained broadly in line with recent trends. GDP grew by 0.1% q/q in Q1 2026 (cons: 0.2%, prior: 0.2%), a weaker-than-expected outcome partly driven by volatility in the Irish economy and disappointing French growth. Meanwhile, the unemployment rate fell to 6.2% in March as expected (prior: 6.3%), reflecting a stable labour market. Although unemployment remains low, softer demand for labour, evidenced by declining vacancy ratios and surveys on employment expectations, points to a more balanced labour market compared to 2021/2022.
In Japan, the Ministry of Finance intervened in currency markets on Thursday to support the yen, which surged by up to 3% against the dollar following the move. This marks Japan’s first intervention in nearly two years and comes amid mounting speculative pressure on the yen. Finance Minister Katayama hinted at further action, suggesting JPY 160 remains a critical threshold for policymakers.
In Norway, the NAV unemployment rate remained steady at 2.1% in April, slightly above Norges Bank’s projection of 2.0%. The marginal rise in gross unemployment reflects a labour market that remains tight and growth near trend. With unemployment levels still low, Norges Bank is likely to maintain its focus on anchoring inflation expectations. Norges Bank also announced that they lift their daily fiscal NOK buying slightly from NOK 50m to NOK 100m in May likely reflecting lower energy prices compared to end-March. This was in line with expectations and should not have any market impact.
Equities: Global equities moved higher yesterday, taking several major indices to fresh all-time highs, including MSCI World, S&P 500, Russell 2000 and Nasdaq.
The move was closely linked to the sharp turnaround in oil yesterday morning. Looking at the oil price over the past 24 hours, the gap between the high and the low has been more than 12%. Importantly, there was no particularly strong trigger behind the massive reversal in oil.
Like yesterday, the key point when analysing market moves is that there are many drivers in play at the same time. Geopolitics, macro data, micro data from one of the busiest earnings days of the season, and central banks. In other words, it is very difficult to separate the individual drivers and assign the exact market reaction to each of them.
One important observation is that yesterday’s move to new equity highs was not led by tech. In fact, tech was the only sector lower on the day, with massive underperformance driven by earnings.
Oil was clearly the major trigger for the risk-on move, but with tech lower, defensives outperformed. On top of that, earnings were strong in defensives, not least in US healthcare, which helped lift the defensive sectors.
This morning, Asia is quieter with many markets closed for 1 May. Nikkei is higher despite a stronger yen in the wake of FX intervention.
Many European markets are also closed today, but US futures are trading higher this morning.
FI and FX: Risk sentiment improved over yesterday’s session, despite Khamenei’s vow to guard Iranian nuclear and ballistic capabilities. Brent Crude pulled back to around USD 114/bbl after breaking above USD 126/bbl at European open. In rates space, EUR swap rates fell back by 5-10bp across the curve and Bund yields declined by 10bp in the medium tenors over the course of the day. In the afternoon, the ECB held policy rates unchanged as widely expected, leaving the deposit rate at 2.00%. Lagarde refrained from providing firm guidance of the future rate path and stated that the ECB will have more information in June to decide, including new projections and scenarios. By extension, the market reaction was highly contained. We continue to expect two hikes in June and July, respectively. EUR/USD jumped higher, breaking above the 1.17 mark. USD/JPY declined sharply by about 2.5% over yesterday’s session. Nikkei reported Japanese intervention in the FX market, aligning with the significant price action. The considerable oil price volatility also impacted NOK FX during yesterday’s session although the magnitude was relatively contained with EUR/NOK kept within a 9-figure range. Norges Bank’s announcement to lift the daily fiscal NOK buying pace by NOK 50m from NOK 50m to NOK 100m also failed to trigger any market response – which we think is fair.
