Risk sentiment stabilises with US and European equities rebounding. Oil prices pulled back from recent highs as the US signalled possible measures to ease Middle East supply risks. US services ISM surprised to the upside

Global equities were mixed. US and European markets rebounded alongside a pullback in oil prices from recent highs, after the US said it is considering offering shipping assistance to help ease oil flows through the Middle East. US equities were supported by data pointing to strength in the services sector. Asian markets declined, led by South Korea, where the Kospi fell 12%, extending its two‑day decline to more than 18% amid an unwinding of leveraged positions. Treasuries were little changed and the US dollar was marginally weaker against G10 currencies.

Oil prices remain volatile. Brent crude pulled back from an overnight peak above US$84 a barrel. U.S. Treasury Secretary Bessent, echoing comments from President Trump, said the US is discussing measures to ease oil flows from the Middle East as the conflict enters a fifth day. Options under consideration include offering shipping insurance via the US International Development Finance Corporation and, if required, naval escorts for tankers transiting the Strait of Hormuz.

The US services ISM surprised to the upside. The headline index rose to 56.1, its highest level since April 2022, driven by a 5.5‑point lift in new orders and exceeding all Bloomberg survey expectations. That said, the ISM has often been a poor guide to hard data on services consumption in recent years. The employment index improved, while the prices index eased.

Front end treasury yields edged higher after the ISM data, but the move proved temporary, and the curve is largely unchanged. The market is pricing around 47bp of easing by the Fed this year, the least since late January due to worries about a resurgence in inflation given the spike in oil prices. 10-year notes were stable near 4.07% while yields closed marginally lower in the main European sovereign bond markets.

The US dollar has declined against G10 currencies since the local close but the moves against the majors were small. USD/JPY pulled back following comments from Finance Minister Katayama that the government could act to quell excessive moves including through market intervention. The NZD and AUD were amongst the best performers likely benefiting from the improved risk tone. The AUD extended the rebound having fallen after the GDP data.

Australia’s economy finished 2025 on a firm footing. Q4 GDP rose 0.8% q/q, lifting annual growth to 2.6%, beating expectations and reinforced by upward revisions to the prior quarter. That said, household spending undershot the Reserve Bank of Australia’s projections from February, prompting a pull‑back in market pricing for a back‑to‑back rate hike at the March 17 meeting.

China’s PMIs were mixed in February. The official measures remained soft, while the RatingDog gauges surprised to the upside, reflecting stronger conditions among smaller and more export‑orientated firms. China’s leadership is meeting to finalise its growth blueprint through 2030. Premier Li Qiang is due to unveil 2026 economic targets today, with a lower growth goal a possibility for the first time since 2023.

Curve flattening dominated NZ rates markets in the local session yesterday, reflecting expectations of a more sustained lift in oil prices. 2‑year swap rates rose 4bp to 3.02%, while the 10‑year was unchanged at 4.02%. The government curve showed a similar flattening bias, with 10‑year bonds closing unchanged at 4.40%. NZDM will offer $250m of May‑2031s and $200m of May‑2035s at today’s weekly tender.

Further partial Q4 GDP data are scheduled today, with Value of Building Work Put in Place allowing us to refine our growth forecast. Otherwise, the local calendar is light on market‑moving data. In the US, initial jobless claims are released, though attention remains firmly on the February labour market report due overnight Friday.

Stuart Ritson is a Markets Strategist at BNZ Markets.