Trading Day: The destructive power of $100 oil

ORLANDO, Florida, March 12 (Reuters) – Global stocks fell on Thursday, slammed by a 10% spike in oil prices, spiking bond yields and a stronger dollar, all of which point to a deteriorating outlook for consumers, businesses and economic growth.

In my column today I argue that, although the “Trump always chickens out” strategy of buying beaten-down stocks on the assumption that the U.S. president backs down from his more extreme policies, the Middle East war may be a “TACO” too far.

If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.

1. Iran’s new supreme leader vows to keep Hormuz shut indefiant first remarks 2. World faces largest-ever oil supply disruption on MiddleEast war, IEA says 3. Trump administration considers loosening US shippingrules to combat fuel price spike 4. Iran oil shock prompts ECB hawks to seek 2021/22rematch: Mike Dolan 5. JPMorgan’s markdown to restrict lending to privatecredit firms, source says

Today’s Key Market Moves

* STOCKS: S&P 500, the Dow, and MSCI World post lowestcloses of the year. Brazil, Mexico -2.5%. Asia likely to opensharply lower on Friday. * SECTORS/SHARES: S&P 500 utilities +0.7%, energy +1%;industrials -2.5%, consumer discretionary -2.2%. Airlines,travel stocks hit hard. Chevron +2.7%, Goldman Sachs, Boeing-4.4%. * FX: Dollar highest since November. AUD -1%, biggest G10FX loser. Emerging FX hit hard again – BRL, MXN, KRW, ZAR, CLPall down 1-2%. * BONDS: Global selloff accelerates. U.S. 2-year yieldjumps 11 bps to highest since August; 10-year Bund yield highestsince Oct 2023; 10-year gilt yield biggest two-day rise sinceFeb 2024. * COMMODITIES/METALS: Oil +10%, Brent back at $100/bbl.Average U.S. gasoline prices up to $3.60/gallon.

Today’s Talking Points

* 2026 Fed rate cut bets evaporate

And just like that, it was gone. Not so long ago – i.e., only a few weeks ago, before the U.S.-Israeli attacks on Iran – many analysts were predicting three interest rate cuts from the Fed this year. As of Thursday, not even one U.S. rate cut in 2026 is fully priced in at all.

Traders have made it clear where they think the stagflation risks lie with oil at $100 a barrel, and the ‘transitory’ lessons of 2021-22 are weighing heavily too. No rate hikes are priced in yet though, and next week would be far too soon. Right? Let’s see what tomorrow’s PCE inflation figures hold.

* Global bond rout

Zoom right out the curve, and geographically, and inflation fears really are intensifying, as the accelerating global bond market selloff shows. Investors are fleeing fixed income everywhere.

On Thursday, the two-year U.S. yield hit its highest since August, and the 2s/10s curve flattened the most since April; Germany’s 10-year yield is near 3% and the highest since October 2023, and UK yields are up 60 bps in two weeks.

* Central bank bonanza

Central bankers are in an unenviable position, and could be forgiven for just wanting to close their eyes, sit on their hands and wish the unfolding crisis away. But many of them are under the spotlight next week in what will be one of the busiest weeks of central bank meetings in a long time.

Here’s a rundown of who’s meeting next week: the central banks of Australia, Canada, Brazil, Japan, Sweden, Switzerland, the euro zone, the UK and, of course, the Fed. The most likely to hike rates is the RBA, then possibly the BOJ, with the rest on hold. But if oil’s at, say, $120 or higher, you never know.

What could move markets tomorrow?

* Developments in the Middle East * Energy market moves * New Zealand manufacturing PMI (March) * Euro zone industrial production (January) * Germany wholesale inflation (February) * UK trade (January) * UK industrial production (January) * Canada unemployment (February) * U.S. PCE inflation (January) * U.S. JOLTS job openings (January) * U.S. GDP (Q4, 2nd estimate) * U.S. University of Michigan inflation expectations (March) * U.S. durable goods (January)

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

(Reporting by Jamie McGeever;)