Inflation Data Softens While Yields Rise, Treasuries and the U.S. Dollar Strengthen

Market Overview

Despite relatively moderate U.S. inflation data and the International Energy Agency (IEA) announcing a record-scale strategic oil reserve release plan, overall market sentiment remained subdued yesterday. Former President Donald Trump continued to downplay Middle East tensions and suggested that the conflict could soon come to an end. However, investor concerns surrounding the situation in the Strait of Hormuz persisted, limiting any meaningful risk appetite.

U.S. equities were largely muted. The S&P 500 and the Dow Jones Industrial Average both closed lower, while the Nasdaq Composite managed to edge higher, supported primarily by a sharp 9% rally in Oracle shares following its earnings report.

Asset performance showed clear divergence across markets:

Precious Metals and Cryptocurrencies

Safe-haven demand was somewhat restrained by Trumps remarks. Spot gold slipped about 0.3%, remaining within its recent consolidation range. Spot silver saw more pronounced weakness, plunging more than 3%. Meanwhile, the cryptocurrency market experienced relatively limited volatility, with investors closely monitoring whether Middle East ceasefire expectations will translate into tangible developments.

Technology and Cyclical Stocks

Sector rotation intensified. Oracle surged more than 9% after reporting strong earnings, providing notable support to large-cap technology stocks. In contrast, cyclical sectors broadly declined, pressured by expectations of higher interest rates and concerns over economic growth, weighing particularly on the Dow.

Bond and Currency Markets

U.S. Treasuries faced continued selling pressure, pushing yields higher across the curve. The 10-year Treasury yield rose 6.8 basis points in a single session and has climbed more than 30 basis points since the onset of the conflict. Market expectations for Federal Reserve rate cuts have cooled, with investors now pricing in only one rate cut this year.

The U.S. Dollar Index (DXY) strengthened by 0.44%, approaching the 99 level and fully recovering losses earlier in the week. Meanwhile, the Australian dollar stood out, reaching its highest level since June 2022.

Energy Market

Crude oil staged a dramatic “V-shaped” intraday reversal. Although the reserve release announcement initially pressured prices, concerns about potential mine deployment in the Strait of Hormuz triggered a sharp rebound. WTI crude surged more than 6% intraday to $91.45 per barrel, highlighting that geopolitical risk premiums remain deeply embedded in oil prices.

Key Themes AheadU.S. February CPI Rises 2.4% Year-over-Year

U.S. core inflation slowed in February broadly in line with expectations. However, rising costs tied to the Middle East conflict, including oil, gasoline, and fertilizer prices, may soon feed back into inflation.

According to Citigroup, the upward pressure from energy prices is highly likely to be reflected in March inflation data. Markets widely expect the Federal Reserve to leave interest rates unchanged at next weeks FOMC meeting.

IEA Approves Record Strategic Oil Reserve Release

Member states including the United States, the United Kingdom, Germany, and France have outlined their respective contributions to the release plan.

• Germany will release nearly 20 million barrels of crude reserves.

• The United Kingdom will contribute 13.5 million barrels.

• French President Emmanuel Macron stated that France will schedule its release within the coming days.

• The United States is reportedly set to release 172 million barrels of oil starting next week.

President Trump commented on the same day that “the IEAs strategic petroleum reserve release will significantly push oil prices lower. Prices will continue to fall, but we will not leave Iran prematurely.”

Key Data to Watch (GMT+8)

20:30 (US)

• Initial Jobless Claims (week ending Mar 14)

• Philadelphia Fed Manufacturing Index (March)

21:15 (EU)

• European Central Bank Interest Rate Decision

21:45 (EU)

• ECB President Christine Lagarde Monetary Policy Press Conference

22:00 (US)

• U.S. Wholesale Sales MoM (January)

• U.S. New Home Sales (Annualized, January)