US will release more oil from its strategic oil reserves

Market movers today

French and Italian CPI figures for February are on the agenda, after German and Spanish ones already surprised on the upside yesterday. ECB's Lane and De Guindos will speak in the morning.

Today we expect Norges Bank to announce an April-shift towards a daily net sale of NOK in its fiscal FX transactions.

US president Biden is set to speak on efforts to lower energy prices, including on the release of oil from its strategic reserves. OPEC+ is also meeting and raising its production is in focus.

In the US, the Fed's preferred inflation indicator PCE core is released and we will also keep an eye on the private spending data for February and comments from Fed's Williams about upcoming Fed hikes (we have recently changed our Fed call, see Fed Update - Quickly back to neutral by front-loading rate hikes, 30 March).

Overnight Chinese PMIs for March are due and we see some downside risks, following recent headwinds from COVID-19 outbreaks, property sector stress and the rise in commodity prices.

The 60 second overview

US to use its strategic reserves to lower oil prices: The Biden administration yesterday announced that it intends to use its strategic reserves to lower the oil price that has seen upward pressure after the Russian invasion. The administration is believed to release about 1 million barrels a day for several months from the reserves, which totalled 700 million barrels at end-January. The move is set to counter the reduced supply of Russian oil which exported about 8 million barrels a day before the war. The International Energy Agency will try to push other countries to release oil from their strategic reserves. The price of Brent oil fell about USD4 a barrel to 108 overnight. OPEC+ will also be meeting today, where a key focus is whether they will raise its oil production to counter the loss of Russian oil supplies to the global markets.

Surge in European inflation and sell-off in fixed income markets: Yesterday, amid the sharp rise in energy prices, inflation surprised strongly to the upside with prints from Spain of 9.8% headline and the regional prints from Germany later confirmed at 7.3%. This led to the market pricing in more hiking by ECB pushing up yields especially in the short end of the yield curve, with the 2y point in Germany rising by 5-7bp across most jurisdictions while the 10 year point was just 1-2bp higher.

Chinese PMIs fall amid COVID outbreak: The official Chinese PMI measure for both the manufacturing and non-manufacturing sectors fell below the important 50 benchmark level, suggesting that the Chinese economy is facing headwinds amid the continued outbreak of the COVID-19 virus across the country and problems in the property sector. China's government cabinet yesterday called on the nation to prioritize stable growth and to draft contingency plans to deal with possible greater uncertainties. The cabinet pledged to stick to goals set for the year, including reaching about 5.5% economic growth. Similarly, the Chinese central bank also wowed to provide more support for the economy saying it would step up the magnitude of monetary policy and make it more forward-looking, targeted and autonomous.

Equities fell back yesterday driven by Europe, US and cyclical growth stocks. On the flipside defensive rose, led by Utilities. Oil was higher ahead of the decision to release reserves in US and hence energy sector outperformed yesterday. Both VIX and V2X a tad higher and equity markets are still sensitive to the news flow coming from Ukraine although we argue that the effects will diminishing as time goes.US equities yesterday, Dow -0.2%, S&P 500 -0.6%, Nasdaq -1.2% and Russell 2000 -2.0%. As we turn to Q2 tomorrow, we get a big portion of key figures where it will be interesting to see how much attention investors will pay to good old fashioned macro data. As March has given big losses on bonds while equities are higher we could see some rebalancing flows at the last trading day of Q1. Asian markets are a bit lower this morning while European and US futures are higher.

FX: Yesterday, EUR/USD continued to move higher, as markets priced in more aggressive ECB tightening after higher-than-anticipated inflation prints in Spain and Germany. For the same reason, EUR/GBP moved up to 0.85. USD/JPY corrected lower yesterday after the recent surge and is now below 122.

Credit: After strong performance in credit markets in recent days we saw some slight profit taking yesterday with Main wider by 0.8bp and ITraxx Xover wider by 5.5bp. 

Nordic macro

Today we expect Norges Bank to announce an April-shift towards a daily net sale of NOK in its fiscal FX transactions. If proven right April will become the first month since October 2013 that Norges Bank has outright sold Norwegian kroner and will reflect the surge in Norwegian petroleum revenues amid the rise in global energy prices.