US consumer sentiment in focus

In focus today

• In the US, the University of Michigan's preliminary consumer sentiment survey for April is set for release. The March edition revealed a significant decline in consumer sentiment, alongside soaring inflation expectations. Markets anticipate the index to decrease further from 57.0 to 55.0.
• We will also look out for the release of March PPI data, which could reveal some insights into how the preparation for tariffs has impacted producer costs.
• In the euro area, ECB's Lagarde is scheduled to speak at the Eurogroup meeting in Warsaw. As the ECB is now in its silent period, we will not get any policy signals.
• In Sweden, the final Swedish inflation data for March will be released this morning at 8.00 CET. The flash estimates undershot both our own and consensus expectations, making today's release important to understand future price developments. Food prices were likely one of the items that came in on the low side compared to forecasts, although they are unlikely to be the only category to do so. We expect the final release to mirror the flash figures, expecting CPI at 0.5% y/y, CPIF at 2.3% y/y and core inflation (CPIF excluding energy) at 3.0% y/y.

Economic and market news

What happened overnight

Overnight, markets adopted a risk-off stance despite yesterday's positive consumer price data. The dollar's sharp decline pushed the EUR/USD above the 1.13 mark this morning, while gold prices surged to a record-high, breaching the USD 3200 per troy ounce. Additionally, the sell-off in US Treasuries intensified, driving the 10-year yield climbing to around 4.45.

What happened yesterday

In the global trade war, the EU announced a pause of retaliatory tariffs to facilitate negotiations, though Commission President von der Leyen cautioned that the tariffs could be reinstated if negotiations are unsatisfactory. Additionally, President Trump escalated the ongoing trade war by raising tariffs on Chinese imports to 125%, now making the effective tariff rate 145%.

In the US, yesterday's key event was the March CPI release, which alongside core CPI surprised to the downside at -0.1% m/m (cons: 0.1%) and 0.1% m/m (cons: 0.3%). Energy prices contributed negatively to the headline figure, while food inflation accelerated. On the core front, goods prices declined from the previous month, and core services inflation also slowed considerably, potentially indicating weakening pricing power among firms. This pre-Liberation Day data warrant cautious interpretation, yet it indicates that broader inflation pressures were relatively subdued ahead of tariffs announcements. The market reaction remained modest. For more insights, see Global Inflation Watch - Disinflation continued ahead of Trump's tariff salvo, 10 April.

In Norway, the eagerly awaited March inflation figures were released, following February's topside surprise, which led Norges Bank to maintain its March policy stance. The figures revealed an annual core inflation rate of 3.4% (prior 3.43%), consistent with both consensus and Norges Bank. Headline inflation registered at 2.6% y/y, slightly below Norges Bank's estimate of 2.7%. However, the core measure remains the most important for policy setting. The details revealed less pronounced increases in air fares and restaurant prices compared to last year, while food prices continued to rise. Consequently, services ex. rent decreased from 3.8 % to 3.5 % whereas domestic goods increased from 7.0% to 7.6% y/y.

In Sweden, February GDP, production and consumption indicators came in as a mixed bag. GDP and production declined -1.5% m/m (prior: -0.5%) and -0.2 % m/m (prior: -0.8 %), respectively whereas consumption increased 1.1% m/m (prior: -0.7%). The data appears somewhat inconsistent, given that consumption carries a significant weight in GDP calculation.

In Denmark, March CPI inflation declined sharply to 1.5% from 2.0% (cons:1.7%), particularly driven by electricity prices. Package holidays showed the largest downside surprise with a 16.5% m/m decrease, which is expected to correct. Core price pressures in Denmark remain muted, consistent with an annual inflation rate of less than 2%.

Equities: Equities retreated on Thursday. However, equities are simply the derivative of what is happening in the FX- and bonds market right now. On top of the financial stress building, the FX swings mean uncharted history for local export companies, trying to defend margins in the US when demand is dropping and FX is making products appear more expensive, on top of tariffs... However, this is not yet visible in European markets where futures are holding up well this morning. US markets sold off yesterday though, with MAG 7 companies leading declines. This was a broad selloff, with 429 of the 500 S&P companies retreating. However, with the rally in the prior session, US equities are still outperforming European ones even on a sector-for-sector basis since April 2nd. Hence, one should probably see the retreat in US markets as reversion to global markets. It should be noted that it was not risk-off everywhere, retail investors were more buoyant sending bitcoin 4% higher but they are typically a lagging and not a leading indicator.

FI&FX: US equities had a rough session throughout Thursday's session, dropping between 3.5-4.5% throughout the session, while European equities caught up with the global rebound on Wednesday evening following the 90-day tariff pause announcement. EUR/USD has continued moving higher since yesterday, and the cross is trading very close to 1.135 this morning. Havens such as CHF, JPY and gold have been bid since the sentiment turned sour again, while both SEK and NOK have fully reversed the strengthening against EUR seen on Wednesday. Long-end US Treasury yields have risen yesterday with the 10Y tenor almost 25bp higher at 4.45%, while the 2Y point is down 10bp following the soft CPI figures. Brent is trading at USD63.1/bbl. this morning, and the NIKKEI 225 index has shed almost 4% since yesterday.