Oil prices moving up again
It was a positive day in markets yesterday, with stocks higher and bond yields lower, amid some optimism regarding the chances of a ceasefire in the Middle East and a balanced assessment of the outlook for interest rates by ECB President, Christine Lagarde. However, doubts are emerging about the status of any talks between the US and Iran, sending oil prices higher again (Brent crude is back up at around $105 a barrel), which is weighing on markets at the start of play today. The euro and sterling didn’t manage to make any ground against the dollar in yesterday’s session. They are trading are about $1.1560 and $1.3350 respectively this morning, while EURGBP continues to hover just above the £0.8650 level.
In government bond markets, German yields fell by 6-7bps, helped by Lagarde’s comments on interest rates, while UK yields were 6-12bps lower across the curve. US bonds underperformed with yields ending flat to marginally lower on the day. In equity markets, European stocks had a solid session, adding more than 1%, while the S&P 500 closed with gains of around half a percent.
ECB President Christine Lagarde says it is too early to decide on the interest rate response to the fall-out from the conflict in the Middle East. She notes that, “in the period ahead, incoming information will give us greater clarity on how the conflict is likely to evolve and how the economy is responding,” which in turn will allow the central bank to “set monetary policy as appropriate” to deliver on its 2% inflation target.
Business confidence in Germany fell this month according to the latest ifo Business Climate Index, which registered its lowest reading in just over a year. The survey notes that “uncertainty among companies has increased noticeably,” with the war in Iran putting “any hope of a recovery on ice for the time being.”
Economic data due today include money supply/credit growth for February in the Euro area and the regular weekly jobless claims in the US. We will also hear from a number of Bank of England/Fed/ECB members during the course of the day.