The ECB will continue to tighten policy until the autumn. Oil prices are rising on strong data from China

The US Treasury bond yields fell after data showed that US jobless claims jumped to their highest level in nearly two years. Despite signs of a downturn in the labor market, the latest retail sales data, which were unexpectedly positive, suggests that the average consumer remains in good shape.

The European Central Bank (ECB) raised interest rates to a 22-year high, as expected. The ECB interest rate rose from 3.75% to 4.00%. The central bank expects inflation to remain above the 2% target through 2025 and once again hinted at further rate hikes in the coming months. In the latest macroeconomic forecasts, ECB staff now expects overall inflation to be 5.4% this year, 3% in 2024, and 2.2% in 2025. Core inflation is expected to be 5.1%, 3%, and 2.3%, respectively. During the press conference, President Christine Lagarde departed slightly from the ECB’s recent strategy, focusing on forward projections and applying a meeting-by-meeting approach.

Oil was up by 3% yesterday due to strong data from China as well as dollar weakness. Chinese refinery productivity was up by 15.4% in May from a year ago, reaching the second-highest level on record. Oil demand in China is expected to continue growing at a guaranteed rate in the second half of the year. Analysts expect the voluntary oil production cuts implemented in May by OPEC countries as well as Saudi Arabia to support oil prices at a time of strong demand.

A Turkish energy delegation will meet with representatives of Iraqi oil companies in Baghdad on June 19 to discuss resuming Iraq’s northern oil exports. Turkey suspended 450,000 barrels of Iraq’s northern exports through the Iraq-Turkey pipeline on March 25 following an International Chamber of Commerce (ICC) arbitration ruling.

Asian markets traded higher yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.05% for the day, China’s FTSE China A50 (CHA50) was up by 1.82%, Hong Kong’s Hang Seng (HK50) ended the day up by 2.17%, and Australia’s S&P/ASX 200 (AU200) closed positive by 0.19%.

The Bank of Japan maintained an ultra-soft monetary policy on Friday, despite stronger-than-expected inflation, as it focused on supporting a fragile economic recovery amid a sharp slowdown in global growth. As price growth shows signs of expanding, markets are focused on whether Bank of Japan Governor Kazuo Ueda will issue a stronger warning about the risk of overshooting inflation at his press conference.