Chart of the Day

Oil prices are on the rise again, with brent now hovering near $90. The move has surprised some forecasters, who expected oil prices to fall this year as OPEC started increasing output. With oil demand taking a hit lately from the reduction in travel related to the Omicron output, the rise in prices seems to reflect concerns about the potential fallout from a Russia-Ukraine conflict. No matter the cause, if oil prices keep rising, then it could cause some central banks to take a further hawkish as they attempt to combat high inflation.

Macro

The first estimate showed eurozone GDP fell by 0.3% QoQ in Q4, though annual growth was a stronger 4.6%.

German GDP fell in Q4, by 0.7%, and the Ifo points to a weak Q1 as well.

Korean export growth is inching down, a potential signal about the future direction of global equities.

Markets

The Nasdaq enjoyed the strongest rebound among the US equities markets yesterday.

The ratio of the cyclical industrial sector to the defensive utilities sector is not painting a particularly encouraging sign about the outlook though.

The rebound in equities is in part because yields appear to have plateaued.

In addition, real yields have dropped back a bit, as inflation breakevens have risen alongside the rise in oil prices.

In the eurozone, long-term inflation-linked swaps have been declining again and are still someway below 2%, limiting the scope for the ECB to turn more hawkish any time soon.

The CAD suffered similar-sized falls to the NZD and AUD during the equity market sell-off, but is now rebounding faster and there could be more of that to come given the rise in oil prices, one of Canada’s main exports.

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