US strikes Ukraine-Russia ceasefire

In focus today

In the US, February durable goods orders will be released. In the evening, the Fed's Musalem will be on the wires.

In the UK, the day is packed with action. We get inflation data for February, where focus is on the momentum in core services, which continues to prove remarkably sticky. In the afternoon, Chancellor Reeves will present the Spring Statement, where the Labour government faces some tough choices in meeting its fiscal objective while aiming to improve the UK economy's growth prospects. Previously, such fiscal announcements have proved important for UK markets, with substantial spillover particularly affecting global rates markets. 

In Sweden, two key releases are in focus. The latest Economic Tendency Survey from NIER will be published. Our primary focus will be on the price plans within the retail and service sectors, as they will be crucial for the near-term inflation development. Additionally, we will observe whether the recent dip in consumer confidence persists, as this could further relay the consumption-led economic recovery. The minutes from last week's Riksbank meeting are also set to be released. We are particularly interested in the individual board members assessment of the balance of risks between recent high inflation prints and the real economy, and whether the general sentiment supports the latest money-market repricing.

In China, we still await the PBoC policy rate decision, the 1-year Medium-Term Lending Facility rate. We expect it to be unchanged again as we believe the central bank will continue to be sidelined for now until we move closer to another Fed cut.

Economic and market news

What happened overnight

In the US, while Chicago Fed President Goolsbee (dove and voter) stressed that he expects interest rates to be a "fair bit lower" in 12-18 months, he emphasized that it may take longer than expected to reach these levels amid economic uncertainty, favouring a "wait and see"- when facing uncertainty.

In commodity space, oil prices neared a three-week high around USD73.20/bbl in early trading amid supply concerns related to the US' efforts to curb Venezuelan oil exports and a larger-than-expected drop in US crude inventories. The U.S. imposed new sanctions on Venezuelan oil, with Trump authorizing 25% tariffs on imports from any buyer. This stalled Venezuelan oil trade with China as refiners awaited guidance.

What happened yesterday

In Germany, the IFO index rose as expected in March, mirroring the movement seen in yesterday's PMIs. Both the current situation assessment and expectations indices increased, indicating a stabilisation of German activity. While this suggests the decline may be ending, a rebound has yet to be observed. We expect a slow rise in German activity during 2025, supported by lower policy rates and rising real incomes, as evident in the expectations component reaching a five-month high. The rising expectations in March were primarily driven by the manufacturing sector. We expect that the effect from the fiscal package passed last week is likely some years ahead of us, as planning and implementing large infrastructure projects requires time.

In the US, the March Consumer Confidence Index fell short of expectations at 92.9 (cons: 94.0), according to the Conference Board. While economic expectations have reached their lowest since 2013 and inflation expectations tick higher, like the Michigan survey, perceptions of labour market conditions (the Jobs Plentiful index) remain unchanged. Household intentions for major purchases are also unchanged, with an increase in respondents planning vacations, indicating that while concerns exist, they may not be significant enough to alter consumer behaviour.

In Sweden, the February PPI figures came in lower than expected at -0.1% m/m (prior: 1.7%). Looking at the details, there is some relief in for example food prices which seem to be levelling out, at least from the producer side. Since foodstuffs has been perhaps the biggest driver for the topside surprises in Swedish inflation thus far into 2025, this would be a welcome development.  

In Hungary, the NBH leaves the base rate unchanged at 6.50% as expected. The rate decision is crucial to anchor inflation expectations and stabilise the currency.

In geopolitics, following the parallel talks in Saudi Arabia, the US brokered maritime and energy ceasefires between Ukraine and Russia on Tuesday. The agreements are the first formal commitment since President Trump took office. However, the outlook for implementation remains uncertain, as it depends on Moscow securing the lifting of sanctions on Russian banks involved in agriculture, along with their reinstatement in the SWIFT messaging system; both of which require EU approval.  

Equities: Equities were mostly higher yesterday, in a "no news is good news" manner. Investors locked in another 0.2% to the S&P 500, on top of the Monday rally. We see the rebound in US equities as an effect of volatility coming down. Just look at VIX closing in at 17 yesterday from 28 two weeks ago. Stoxx 600 did some catchup, rising 0.7%. Cyclical growth stocks rebounded in both regions, including most of the Mag 7 names. However, tech stocks shared the outperformance with banks and energy. This is a quite rare combination, but I guess both tech and European bank stocks can be considered "momentum" these days. Defensives sold off with health care and staples some of the few sectors in red. Futures are broadly unchanged this morning.

FI&FX: Back-and-forth headlines over a potential Ukraine-Russia ceasefire made for some choppy price action across asset classes. The US yield curve steepened somewhat, led by a lower front-end following a solid US2y auction. EUR/USD continued consolidation around 1.08 whereas USD/JPY traded lower, defying the risk-on sentiment within FX. UK inflation data will be scrutinized today, as will the Riksbank minutes especially considering current money market pricing and the last session's strong run for the SEK.