00:00Good morning to you. So we've got CPI out of France coming in pretty much in line with estimates,
00:04confirming a decent-sized jump from the last month's reading.
00:08That seems to be the same narrative we were playing with yesterday.
00:10Yes, inflation has jumped up, but it's coming in in line with estimates.
00:15What kind of comfort does that give you?
00:16Yeah, so ultimately, as you said, we are pretty much on track for a consensus read today,
00:20which would be about 2.6% for the harmonised Eurozone wide figure.
00:24And that kind of puts us back to roughly where we were about January last year.
00:29And that was a point where the ECB was actually cutting rates.
00:32Obviously, you know, the direction of travel from inflation is different,
00:34but it kind of goes to show you that at those levels, it's not really cause for alarm for the
00:38ECB at the moment.
00:39And then when you couple that with the messaging from the ECB about looking for patients,
00:43the guards want to send sufficient information, it doesn't really cause too much alarm.
00:47So you've got to think ahead then to the April meeting.
00:49Will they have much more information?
00:51They get inflation just a few hours before the decision.
00:54But ultimately, I don't think there's going to be a near-term move for the ECB.
00:57I think if that comes, it will likely be June when they have their round of economic forecasts.
01:02But even then, I'm still, you know, relatively sceptical about whether we do actually get a hike anyway.
01:06You know, as we've discussed before, policy is meaningfully more restrictive.
01:10Gas moves have been a lot less disorderly.
01:12Labour market is weaker.
01:13And we haven't had this like post-COVID bounce back in activity.
01:17So now we've got yields steady across Europe, across the curve,
01:20but they're lower in the US as they were yesterday.
01:23We heard from Jay Powell talking about how, you know, inflation expectations are anchored in the short term.
01:30Why does it seem like, at least for US bonds, the concern has turned now from inflation to growth?
01:36Yes, I think the US is like a little bit different story to kind of what we're seeing in Europe.
01:40Obviously, you know, the Fed is an institution.
01:41They have a dual mandate.
01:42So obviously, they need to look at labour market and inflation.
01:44From an economic perspective, the US economy is definitely less exposed from an inflationary standpoint than, for example, the Eurozone.
01:51So it makes sense for them to be taking a more balanced view.
01:54And when you think that they're actually primed to be cutting rates relatively substantially ahead of the conflict relative to,
02:00you know, a central bank like the ECB,
02:02then this kind of dovish inflection and the US kind of going in its own way does make a lot
02:06more sense.
02:07And, you know, obviously, throughout the week, we do get a lot of US data, particularly on the labour market.
02:11We have jolts, you have ADP, we have non-farms, obviously, the market's closed on Friday.
02:15And I think if that does come in softer, then you can see an extension of some of these moves,
02:20particularly as well, if you also see it in the real economy.
02:22You know, we have the ISM data this week.
02:24That's a lot of data capture for the conflict.
02:27So I think, yeah, the US definitely has potential to go its own way relative to other peers.
02:31OK, let's talk about stocks briefly then, Adam.
02:33We saw a jump in futures in Europe and the US on the back of that Wall Street Journal report
02:38about whether President Trump would call an end to this without reopening the Straits of Hormuz.
02:43Are we losing faith in that argument?
02:44It seems a little bit wobbling slightly.
02:46I'm definitely cynical myself over that report.
02:49I mean, the fact that the Hormuz Strait could potentially remain closed is absolutely a massive caveat.
02:53That's very much where the economic pain for the global economy is being felt.
02:57And, you know, this is about incentives.
02:59You know, if the US steps away, what is the incentive for Iran to then reopen the Straits of Hormuz?
03:03Brent's up around 50% from pre-conflict levels.
03:06So therefore, at that point, you know, why would they reopen it?
03:09And if that's the case, then crude will need to retain a geopolitical risk premium.
03:13And plus, this is just secondhand reports from the US.
03:15We still don't know what the US administration is saying and, more importantly, what they're actually going to do.
Comments