GGMA Morning Brief: Oil prices stabilise / ECB won’t allow inflation shock / RBA expected to hike / JPM marks down private credit loans / Today: ECB & Fed speak, US CPI
Good morning,
I hope all is well.
Here are the main overnight news and market movers:
Markets: Oil prices find relief as WSJ reports IEA release of reserves
Oil markets found fragile relief overnight as the Wall Street Journal reported the IEA had proposed its largest-ever coordinated release of strategic petroleum reserves, helping push Brent below $90 and WTI to $83.44. Meanwhile, Canada is "urgently exploring options" with provinces and the energy industry to boost oil supply amid trade disruptions caused by the war in the Middle East, according to Bloomberg.
The respite bolstered Asian equities broadly, with MSCI Asia Pacific gaining 1.8% and South Korea’s KOSPI surging nearly 3%, but has since given back some of those gains. Oracle shares jumped around 10% after hours on a cloud revenue beat, lifting U.S. equity futures.
Treasuries edged higher as the 10-year yield fell one basis point to 4.14%, ahead of today’s U.S. CPI release. The report is expected to show core inflation at +0.2% month-on-month, suggesting some easing in price pressures before the Iran war introduced new uncertainty about the inflation outlook.
Japan’s 10-year JGB yield is only a little changed, with the PPI print for February showing wholesale inflation cooling to 2.0% year-on-year from 2.3%, below the 2.1% consensus. However, yen-based import prices accelerated to +2.8% year-on-year as the weak yen amplified crude oil costs, suggesting the oil shock has yet to feed through fully.
Gold held above $5,200 on persistent safe-haven demand, while Treasuries edged higher with the 10-year yield dipping to 4.14%. The US dollar index edged lower.
The Australian dollar is firmer across the board this morning. The recent upward trend in AUDUSD has been supported by a widening of interest rate differentials between Australia and the US, as well as with other countries (see chart). The focus is now on the next RBA meeting.
Market Snapshot
Source: Tradingview.com
U.S. escalates strikes on Iran as allies strain under widening Middle East conflict
The U.S.-Iran conflict is intensifying on multiple fronts. American forces have struck minelaying ships in Iran amid warnings of an "intense" day of bombing, while Iran's arsenal of cheap, abundant weaponry is placing unprecedented strain on the U.S. military. The pressure extends to the diplomatic sphere as well — a deleted tweet from the U.S. Energy Secretary sent oil markets into turmoil, and the White House is grappling with Gulf allies' concerns about dwindling missile-interceptor supplies. Israel, meanwhile, is deepening its commitment to the fight, planning a $13 billion budget expansion for the war effort and rejecting Lebanon's request for a pause in fighting to allow for negotiations — signalling a broader regional appetite for continued military action even as President Trump claims the war is nearly won. The violence continues to spread, with a drone striking a U.S. diplomatic facility in Iraq, underscoring how far the conflict's reach now extends across the Middle East. (Sources: WSJ, BBC, BBG, WSJ, FT, CBS, WAPO)
Tillis praises Warsh after meeting, yet won’t lift Fed blockade
Kevin Warsh met with Senator Thom Tillis to discuss his Federal Reserve chair nomination, but Tillis will block all Fed nominations until the Justice Department completes its investigation into Chair Jerome Powell. Tillis said he has no personal objections to Warsh and aims to protect Fed independence; without his support, Warsh's nomination may not move forward in the Banking Committee. (BBG)
ECB won’t allow repeat of last inflation shock, Lagarde says
ECB President Christine Lagarde has stated that the bank will work to prevent inflation from rising in the euro zone due to the war in Iran, as it did after Russia invaded Ukraine. Policymakers remain flexible amid energy market uncertainties and may present extra forecasts at the upcoming meeting, Bloomberg reports. 2-year bond yields have increased since the war began at the end of February, reflecting heightened expectations of interest rate hikes amid an oil-price-induced inflation shock. Some of those expectations have been pared back recently, though.
The European Central Bank will move quickly and decisively if more expensive fuel due to the Iran war feeds into a more durable rise in euro zone inflation, ECB policymaker Joachim Nagel told Reuters. Nagel, who heads Germany’s Bundesbank, said Trump’s words offered "cause for hope", but the jump in energy prices had worsened the economic outlook and lifted inflation risks. "We must be very vigilant," Nagel said in emailed comments. "If it becomes apparent that the current energy price increases will translate into broad consumer price inflation in the medium term, the Governing Council of the ECB will act decisively in a timely manner." Like many of his colleagues, Nagel said he backed "a wait-and-see approach" but the latest turmoil had likely ended recent debate about inflation undershooting the ECB 2% target. "The discussions about falling short of our inflation target are likely to be over for the time being," Nagel said.
BOJ set to hike rates next quarter; Middle East conflict has no impact: Reuters poll
A Reuters poll found that the Bank of Japan is expected to hold rates steady at 0.75% at its March 19 meeting but raise them to 1.00% by the end of June, with expectations largely unchanged despite the U.S.-Israeli war against Iran. While the conflict has driven up oil prices and stoked global inflation fears — particularly relevant for oil-dependent Japan — economists see the BOJ staying on its gradual tightening path, with June or July as the most likely timing for the next hike. Further increases to 1.25% and 1.50% aren't expected until early 2027 and 2028, respectively, and the recent appointment of two stimulus-leaning academics to the policy board is not seen as a barrier to future rate rises. (RTRS)
Two of Australia’s top banks see the RBA hiking the key rate in March
Economists at three of Australia’s “Big Four” lenders expect the Reserve Bank to deliver a second consecutive interest-rate increase next week as it grapples with persistently strong inflation. In research notes published Wednesday, National Australia Bank Ltd., Westpac Banking Corp. and ANZ Bank predicted a 25-basis-point rate hike to 4.1%, joining similar forecasts from UBS Group AG and Deutsche Bank AG. (Continue Reading – BBG)
JPMorgan is marking down the loan portfolios of private credit groups
JPMorgan Chase has clamped down on lending to private credit groups, with bankers looking to cut risk amid concerns about the credit quality of companies in their stables. (FT)
Today’s Macro Roadmap: ECB & Fed speak / US CPI report
US CPI — February (13:30 CET)
Consensus expects headline CPI +0.3% m/m (2.4% y/y) and core +0.2% m/m (2.5% y/y). However, some investment banks see core coming in firmer. Some analysts expect a softer core, led by services price resets unwinding, modest car rental/airfare increases, and further motor vehicle insurance declines. Others argue that wholesalers and retailers have regained pricing power to pass on higher costs to consumers, especially since October, as the supercore CPI has continued to accelerate.
ISM survey and PMI pricing pressures suggest additional tariff cost pass-through remains in the pipeline.
However, the data will be a snapshot of inflation before the Iran war was initiated on 28 February, which has triggered violent fluctuations in oil prices as shipping lanes through the Persian Gulf have experienced a rare closure. Gas prices have already increased and are likely to push inflation significantly higher when March figures are released next month, analysts say.
ECB & Fed speak
Three central bank speakers are scheduled for Wednesday. ECB Vice-President Luis de Guindos speaks at 09:30 CET in a fireside chat at the 32nd Encuentro del Sector Financiero in Madrid (in Spanish, no text published). He views the current ECB rate level as “appropriate” and maintains a data-dependent, open-minded approach. He sees headline inflation (1.7%) converging toward 2% and considers the euro area economy more resilient than projected. However, he has flagged three key risks: geopolitical tensions (Iran/Middle East), Chinese export competition and trade diversion, and US tariff policy — noting that tariffs are inflationary in the short term but potentially deflationary in the medium term. On 5 March, he warned that if the Iran conflict proves prolonged, “there is a risk that inflation expectations will change.”
ECB Executive Board member Isabel Schnabel delivers a guest lecture at 16:10 CET at the Frankfurt School of Finance and Management (no text published). This is the last day for ECB communication before the March 19 quiet period begins on Thursday. Schnabel stated that ECB monetary policy “remains in a good place,” with inflation projected to be at target and expectations anchored, but warned that the ECB “cannot be complacent” given upside inflation risks from the Iran war and energy price spikes. She flagged persistent labour market tightness — driven by ageing, moderating immigration, and skill mismatches — as a structural source of price pressure. She cautioned against over-reliance on speculative AI productivity gains that have yet to materialise in data.
Fed Vice Chair for Supervision Michelle Bowman speaks at 13:30 CET at the ABA Washington Summit on supervision and regulation — notably not monetary policy, and with the Fed blackout already in effect.
Good luck today, and feel free to ping me in the chat to discuss markets and views!
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