LIVE MARKETS-Fed response key to economic impact of higher oil prices
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
FED RESPONSE KEY TO ECONOMIC IMPACT OF HIGHER OIL PRICES
The surge in oil prices amid escalating Middle East conflict may be manageable for the U.S. economy —unless it forces the Federal Reserve to rethink its rate-cutting plans, according to Societe Generale.
Oil prices rose 6% as the Middle East conflict widened. SocGen analyst Manish Kabra notes that of the five major oil-supply shocks over the past 50 years, three either triggered or amplified U.S. recessions.
The most notable occurred in the 1970s, when spiking oil prices coincided with aggressive Fed tightening, deepening the downturn. The last two shocks, by contrast, occurred amid more resilient growth, limiting macro damage.
“While an exogenous oil shock is never well‑timed, this episode fundamentally can be more manageable than past ones,” Kabra said, citing broadening growth and profits across major economies, supportive fiscal policy, and durable momentum from private sector investment cycles.
SocGen continues to favor broadening growth themes, including S&P 500 Equal Weight and Small and Mid-Cap sectors in the U.S. "We would reassess our stance only if the oil shock proves persistent enough to force a material rethink of the Fed's rate cycle trajectory."
Fed funds futures traders continue to price in two rate cuts this year, with the first now not fully priced until September, pushed back from previous expectations of July.
(Karen Brettell)
EARLIER ON LIVE MARKETS:
WALL STREET'S RECOVERY TRACKS GAINS AT START OF PREVIOUS US WARS CLICK HERE
ENERGY, DEFENSE UP SHARPLY, BUT OFF DAY'S HIGHS; STRATEGISTS WEIGH NEAR-TERM OUTLOOK CLICK HERE
WITH GROWTH STOCKS COMING UP LAME INVESTORS PLAY DEFENSE CLICK HERE
FEBRUARY FACTORY ACTIVITY: WILL THE REAL PMI PLEASE STAND UP? CLICK HERE
FEAR OF MIDDLE EAST WAR CONTAGION MAKES INVESTORS RISK-SHY CLICK HERE
US STOCK FUTURES SLIDE AMID MIDDLE EAST CONFLICT CLICK HERE
THREE VARIABLES ALLIANZ GI IS WATCHING AMID MIDDLE EAST CONFLICT CLICK HERE
MIDDLE EAST CONFLICT: WHAT IT MEANS FOR THE BOE, ECB CLICK HERE
HOLD YOUR NERVES - BARCLAYS CLICK HERE
STOXX SHUDDERS AS IRAN CONFLICT LIFTS OIL, SINKS TRAVEL CLICK HERE
BEFORE THE BELL: EUROPE'S FUTURES DOWN SHARPLY; DEFENCE, AIRLINES, OIL STOCKS ON THE RADAR CLICK HERE
DIRE STRAITS FOR GLOBAL OIL TRADE CLICK HERE
