Increase in Energy Prices Stoke Inflation Concerns Once Again

Crude oil climbs 2% on the day, approach YTD highs. Brent crude rose over 2% on the day to close above $120 a barrel, the increase coming on the back of strengthening demand. The market seems to have fully shrugged off OPEC’s announcement to increase to oil production, at least one key OPEC member saying that oil prices are “nowhere near” their peak. The re-igniting of the crude rally re-invigorated inflation fears and helped send rates higher across the curve- the 10-year Treasury yield once again closing back above 3% at 3.02%.  

European Central Bank meeting looms. The European Central Bank will meet tomorrow in what may be the most crucial ECB meeting in years. The main question for investors heading into the meeting is whether or not the central bank will move to 50bp rate hikes (as the Fed has done) to combat inflation in the continent. Futures currently pricing in a low probability of a rate move tomorrow, but a near 50bp move in a month’s time.