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A new headache for the Fed.
Good morning. This is Jihye Lee writing to you from Singapore. I'm sitting in for the rest of this week for Yeo Boon Ping, who is on leave.
What you need to know today
- U.S. stocks were mixed on the first trading day of the second quarter, with oil prices spiking around 6% after OPEC+ announced it would slash production by more than 1 million barrels per day. The Nasdaq Composite dipped 0.27% while the Dow Jones Industrial Average gained more than 300 points, or nearly 1%. The S&P 500 also gained around 0.4%. In Europe, the pan-European Stoxx 600 was flat, with oil stocks leading gains. Financial services saw a 1.3% downturn, with shares of UBS dropping 3% following reports of job cuts.
- Google told employees in a rare companywide email that it'll be slashing costs on employee services for the next few years. The company will be cutting back fitness classes, staplers, tape and the frequency of laptop replacements. This comes after the company in January announced 12,000 job cuts and indicated it would not pay the remainder of laid-off employees' maternity and medical leaves.
- Russian state media reported that Wall Street Journal reporter Evan Gershkovich, suspected of espionage, has appealed his arrest. A Russian court last week decided he will remain in detention until the end of May. Separately, Russian officials released a video in which a supposed suspect in the death of pro-war Russian blogger Vladlen Tatarsky is seen admitting that she brought a figurine to the café in St. Petersburg that later exploded, killing Tatarsky. In the video, which could have been recorded under duress, Trepova refused to say who gave her the figurine.
- Finland will formally become a member of the NATO defense alliance on Tuesday, the Finnish president's office said. This comes after Turkey formally gave approval on the nation's membership bid at the end of March.
- PRO CNBC Pro screened for stocks that traded higher when oil prices notch their biggest gains, and then listed the names that see the greatest median gains.
The bottom line
The Federal Reserve has a new headache: oil prices. The output cut announced by OPEC+ seems to have knocked out the optimism that traders priced in last week, with rising crude adding to fears of higher — and stickier, no pun intended — inflation.
That means even more complications for the Fed, which already hiked rates to their highest level since 2007 and just faced turmoil in the banking sector. It's also dealt with manufacturing slumping to a three-year low — all with an expected recession looming.
Many of the Fed's global peers have followed suit. Today, the Reserve Bank of Australia meets, and traders have mixed expectations. Some see a pause in rate hikes and potentially a chance to do what the Fed seems to find it increasingly difficult to do: bring in the economy for a soft landing.
As oil prices maintain higher levels, analysts warned the move could push oil back above $100, a level it reached last year for the first time in 2014 after Russia invaded Ukraine. The latest move by OPEC+ supports the view that the United States is losing influence with the bloc's core producers, such as Saudi Arabi and the UAE, according to Andy Critchlow, EMEA head of news at S&P Global Platts.
In fact, U.S. Treasury Secretary Janet Yellen said the production cuts could, down the line, merit a reassessment of the $60-per-barrel price cap set on Russian oil — but not for now. She also called the output cut an "unconstructive act" for efforts made by the U.S. to curb inflation
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