Earnings driving moves as ECB survey points to sharp rise in future inflation

EU mid-market update: Earnings driving moves as ECB survey points to sharp rise in future inflation; Remain stalled on US/Iran diplomacy.

Notes/observations

- Equities opened weaker in Europe but since turned slightly positive, with markets balancing earnings and ongoing Iran uncertainty. Asia was mostly lower overnight and US futures are softer. Oil is the main focus, with WTI and Brent up over 2% as Trump remains skeptical of Iran’s latest Strait of Hormuz proposal, though backchannel diplomacy is reportedly continuing. Markets still looking through the lack of clear diplomatic progress for now.

- Trump reportedly made no decision Monday on Iran’s proposal, with officials worried the U.S. could slide into a frozen standoff: no war, no deal, forces stuck in the region, and the Strait of Hormuz remaining closed. Some advisers want to keep the blockade in place, betting that sanctions and oil-storage pressure could force Iran to shut wells and absorb severe economic damage. The core obstacle is that Trump appears reluctant to accept a proposal that would delay nuclear talks - the very issue he has framed as the reason for striking Iran.

- Sec of State Rubio in the interview said the U.S. has indications Khamenei is alive and described Iran’s latest offer as better than expected, while noting that direct US-Iran communication exists only through one or two discreet channels and that he has never spoken with Iran’s foreign minister.

- Press reports Iran’s foreign minister is not returning to Pakistan after his Russia visit, despite Indian media reports claiming otherwise. Iran’s team reportedly remains in consultation mode and will head back to Islamabad only when talks show real prospects for progress.

- BOJ delivered a hawkish hold overnight, keeping rates unchanged but with a tighter 6-3 vote split and upgraded inflation forecasts alongside weaker growth projections. Strengthened expectations for a June hike, supporting the yen and reinforcing the broader higher-for-longer rates theme.

- ECB’s Consumer Expectation Survey saw a large jump at 4.0% for 1-year ahead inflation, significantly above 2.8% estimate, which is historically close to actual figures.

- OpenAI reportedly missed key FY25 goals for ChatGPT revenue and one-billion weekly users, with usage said to be stuck in slight above 900-million range as rivals like Gemini, Anthropic, and enterprise coding tools gained ground. The bigger concern is that CFO Sarah Friar reportedly warned revenue may not scale fast enough to cover future compute commitments, prompting leaders and board members to scrutinize massive data-center spending. She also reportedly questioned a 2026 IPO timeline and pushed for stronger internal controls, suggesting the issue is not just growth—but whether OpenAI’s infrastructure ambitions are outrunning its business model.

- Treasury yields are modestly higher, Bunds sit near 3.05%, and UK gilt yields have pushed to one-month highs near 5.0%. Increasingly seeing less room for Fed and BoE cuts this year as inflation risks rise.

- Earnings are driving stock moves with BP higher after strong Q1 results, Nexans and SSAB are firmer after solid updates, while Novartis and Air Liquide are weaker after softer prints. Telenor fell after cutting guidance. Taylor Wimpey is under pressure after flagging pricing weakness and higher build-cost inflation, increasing risks to profit estimates. Barclays posted a solid Q1 and maintained guidance, though shares are softer on mixed divisional trends.

- Asia closed mostly lower with Nikkei225 underperforming -1.1%. EU indices +0.1-1.1%. US futures +0.2% to -0.4%. Gold -1.3%, DXY +0.2%; Commodity: Brent +2.8%, WTI +3.2%; Crypto: BTC -1.4%, ETH -1.6%.

Asia

- Bank of Japan (BOJ) left Target Rate unchanged at 0.75% (as expected) for its 3rd straight pause under the current phase of its tightening cycle. Statement noted that the vote to keep policy steady was 6-3. Dissenters were Nakagawa, Takata, Tamura (**Note: prior decision saw 8-1 vote). Reiterated stance to keep raising rate in response to price developments. Needed to watch Mid East developments.

- BOJ Quarterly Outlook for Economic Activity and Prices cut the FY26/27 GDP growth forecast from 1.0% to 0,.5% (**Note: current fiscal year) and cut FY27/28 GDP growth from 0.8% to 0.7%. Projections raised the FY26/27 CPI forecast from 1.9% to 2.8% (**Note: current fiscal year) and raised FY27/28 CPI forecast from 2.0% to 2.8%.

- Japan Mar Jobless Rate: 2.7% v 2.6%e.

- South Korea Apr Business Manufacturing Survey: 99.1 v 97.1 prior; Non-Manufacturing Survey: 92.1 v 92.0 prior.

- New Zealand Mar Filled Jobs M/M: 0.3% v 0.2% prior.

- Australia ANZ Roy Morgan Weekly Consumer Confidence: 63.5 v 64.3 prior.

- Japan Fin Min Katayama stated that would work even more closely with US based on FX accord; will act when necessary.

- China's Politburo Meeting domestic economy indicators doing better than expected in 2026. Reiterated its vow more proactive fiscal policy and maintain a moderately loose monetary policy.

Global conflict/tensions

- Trump and his national security team are skeptical of Iran's latest offer, which would reopen the Strait of Hormuz in exchange for tabling nuclear discussions.

Europe

- UK Apr BRC Shop Price Index Y/Y: 1.0% v 1.4%e.

Americas

- Canada PM Carney announced to set up national sovereign wealth fund with initial endowment of C$25B.

Energy

Kpler: Iran quickly running out of oil storage space—estimated at just 12 to 22 days remaining—which could force significant production cuts of up to 1.5 million barrels per day by mid-May.

Speakers/fixed income/FX/commodities/erratum

Equities

Market focal points/key themes: European indices opened generally lower and traded sideways through the early part of the session; markets wary of latest developments in Middle East; among better performing sectors are financials and energy; underperforming sectors include health care and consumer discretionary; oil & gas subsector supported after Brent breaks above $110/bbl; earnings expected in the upcoming US session include Novartis, IBM, Visa and Paccar.

Equities

- Energy: BP [BP.UK] +2.5% (earnings).

- Financials: Barclays [BARC.UK] -3.5% (earnings).

- Healthcare: Qiagen [QGEN.UK] -6.0% (prelim results), Bayer [BAYN.DE] -2.5% (US Supreme Court appeared divided over Bayer's request to limit lawsuits in state court which alleges that Roundup weedkiller causes cancer).

- Industrials: SSAB [SSABA.SE] +0.5% (earnings), ASSA ABLOY [ASSAB.SE] -1.0% (earnings; price increases).

- Materials: Air Liquide [AI.FR] -4.5% (earnings).

- Telecom: WPP [WPP.UK] +0.5% (trading update).

Speakers

- ECB Q1 Bank Lending Survey: Banks expected further tightening of credit standards and declines in loan demand in Q2.

- Czech Central Bank (CNB) Dep Gov Frait: Monetary policy is in a favorable position.

- BOJ Gov Ueda post-rate decision press conference noted that uncertainty remained over Middle East situation; to make appropriate decision from next meeting on. Want to take a little more time to confirm impact of Middle East situation on prices, economy. Not seeing immediate need to raise rates. Could not say how many months it would take to gauge timing of next rate hike.

- Bank of Korea (BOK) Apr Minutes saw one member noted that the Iran war was increasing both inflationary pressure and market volatility. Another member noted it was too early to tell if Iran war would fundamentally impact the inflation path. One member added that a wait and see mode was more appropriate. Another member stressed that paying attention to FX, inflation and rates were the priority at this time.

- China Foreign Min Wang Yi urged EU to respect free competition. Concerned about recent trade restrictive measures from EU.

Currencies/fixed income

- The USD/JPY pair was a tad volatile during the rate decision and press conference. Initially the yen was former on the back of the more hawkish dissenters of the policy decision. Dealers noted tht the 6-3 vote to keep policy steady signaled a high probability of a hike as soon as June. However, BOJ Gov Ueda struck a more dovish tone during the press conference as he noted was not seeing any immediate need to raise rates. The likelihood of its main scenario outlook had lowered.

- EUR/USD stayed around the 1.17 level. A hotter ECB survey on inflation expectations dialed up rate hike expectations to almost three during the course of 2026.

- Yield Summary: 10-year German Bund yield last at 3.06%, France 10-year Oat at 3.71% and 10-year Gilt yield at 4.99% 10-year Treasury yield: 4.32%; 10-year JGB: 2.45%.

Economic data

- (JP) Japan Mar Final Machine Tool Orders Y/Y: 28.0% v 28.1% prelim.

- (SE) Sweden Mar Trade Balance (SEK): 9.3B v 0.7B prior.

- (ES) Spain Q1 Unemployment Rate: 10.8% v 9.8%e.

- (ES) Spain Mar Adjusted Retail Sales Y/Y: 4.1% v 2.2% prior; Retail Sales Y/Y: 3.7% v 2.0% prior.

- (ZA) South Africa Feb Leading Indicator: 120.2 v 119.6 prior.

- (EU) Euro Zone Mar ECB 1 Year CPI Expectations: 4.0% v 2.8%e; 3 Year CPI Expectations: 3.0% v 2.6%e.

- (AT) Austria Apr Manufacturing PMI: 51.2 v 52.4 prior.

- (IT) Italy Feb Industrial Sales M/M: +0.6% v -0.2% prior; Y/Y: +0.5% v -0.8% prior.

- (HK) Hong Kong Mar Trade Balance (HKD): -89.1B v -67.4Be; Exports Y/Y: 35.8% v 13.1%e; Imports Y/Y: 41.2% v 15.5%e.

- (IT) Italy Mar PPI M/M: +5.9% v -0.8% prior; Y/Y: +5.4% v -3.7% prior.

Fixed income issuance

- (EU) EFSF opened its book to sell EUR-denominated 7-year bonds; guidance seen +26bps to mid-swaps.

- (NL) Netherlands Debt Agency (DSTA) sold €1.31B vs. €1.0-1.5B indicated range in 3.75% Jan 2042 DSL Bonds; Avg Yield: 3.465% v 0.113% prior.

- (UK) DMO sold £1.0B in 0.125% Jan 2028 Gilt via Tender; Avg Yield: 4.219% v 3.336% prior; bid-to-cover: 4.28x v 4.05x prior.

- (AT) Austria Debt Agency (AFFA) sold total €1.782B vs. €2.0B indicated in 3-month and 6-month bills.

- (IT) Italy Debt Agency (Tesoro) sold total €4.5B vs. €4.5B indicated in 3-month and 6-month bills.

Looking ahead

- (ID) Indonesia to sell bills and bonds.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:25 (CH) Switzerland to sell 3-month Bills.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 05:30 (ZA) South Africa to sell combined ZAR2.55B in 2038, 2042 and 2053 bonds.

- 05:30 (PL) Poland to sell Bonds.

- 05:40 (UK) BOE allotment in 6-month GBP-enhanced liquidity repo operation (ILTR).

- 06:00 (FR) France Q1 Total Jobseekers: No est v 3.347M prior.

- 06:00 (IE) Ireland Mar PPI M/M: No est v -1.1% prior; Y/Y: No est v -5.5% prior.

- 06:00 (EU) ECB allotment in 3-month LTRO tender (prior €6.62B with 41 bids recd).

- 06:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 06:30 (IN) India Mar Industrial Production Y/Y: 2.9%e v 5.2% prior.

- 06:30 (UK) DMO to sell £1.25B of 4.25% Jun 2032 Gilts via tender; Avg Yield: % v 3.952% prior; bid-to-cover: x v 4.17x prior (Feb 17th 2026).

- 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base Rate unchanged at 6.25%.

- 08:00 (BR) Brazil mid-Apr IBGE Inflation IPCA-15 M/M: 1.0%e v 0.4% prior; Y/Y: 4.5%e v 3.9% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:15 (US) ADP Preliminary Employment Change for 4-weeks ending Apr 11th: No est v +54.8K prior.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 (US) Feb FHFA House Price Index M/M: 0.1%e v 0.1% prior.

- 09:00 (US) Feb S&P Cotality House Price Index (20-City) M/M: 0.20%e v 0.16% prior; Y/Y: 1.00%e v 1.18% prior; House Price Index (overall) Y/Y: No est v 0.91% prior.

- 10:00 (US) Apr Richmond Fed Manufacturing Index: 1e v 0 prior.

- 10:00 (US) Apr Consumer Confidence: 89.0e v 91.8 prior.

- 10:30 (US) Apr Dallas Fed Services Activity: No est v -13.3 prior.

- 11:30 (US) Treasury to sell 6-week notes.

- 11:30 (US) Treasury to sell 2-year FRN.

- 13:00 (US) Treasury to sell 7-Year Notes.

- 13:30 (EU) ECB chief Lagarde.

- 16:30 (US) Weekly API Crude Oil Inventories.

- 18:00 (CL) Chile Central Bank Interest Rate Decision: Expected to leave Overnight Rate unchanged at 4.50%.

- 20:30 (NZ) RBNZ Gov Breman speaks on Panel.

- 21:30 (AU) Australia Mar CPI M/M: No est v 0.0% prior; Y/Y: 4.8%e v 3.7% prior.

- 21:30 (AU) Australia Mar CPI Trimmed Mean M/M: No est v 0.2% prior; Y/Y: 3.3%e v 3.3% prior.

- 21:30 (AU) Australia Q1 CPI Q/Q: 1.4%e v 0.6% prior.

- 21:30 (AU) Australia Q1 CPI Trimmed Mean Q/Q: 0.9%e v 0.9% prior; Y/Y: 3.5%e v 3.4% prior.