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February PCE and ceasefire notes ?3

09:34 09-Apr-26

In another delayed report, February PCE numbers came in at +0.4% for both the headline and Core, generally in line with estimates.  Spending was +0.5%, a tenth lower than forecast, while Income was -0.1%, far worse than expectation for a half percent rise.  American equity futures haven't reacted much ahead of March CPI tomorrow morning, but this data remains inconsistent with the Fed's goals, and the disparity between income and spending is especially problematic.  Our parent CrowdWisers service has spoken with a planning professional for one of the nation's largest grids who confirms that the rise in electricity prices has only just begun.  The Fed continuing to ignore the Core figure is likely to become increasingly unpopular in the face of that. 

The big news overnight is a two-week ceasefire where Iran and America are, of course, both claiming victory.  My take is that both sides dearly need the chance to resupply.  Trump can legitimately claim the destruction of Iran's navy, which should take a long time to rebuild, and the more temporary degradation of its missile capabilities.  Iran has demonstrated the limits of the American military as well as enduring control of the Strait of Hormuz on which it and Oman will be charging a transit fee for passage.  The Pentagon and White House have scheduled press conferences throughout the morning, but I will prioritize more reliable sources of information.

First among these is a drop in oil pricing well into double digit percentages, and broad but lesser dollar weakness.  A timely first quarter update from Shell helps quantify and detail the impact of almost six weeks of war.  It shows natural gas production down just over 5%, mostly due to halved operation at Qatar's Pearl LNG facility, which will take about a year to restore, even if hostilities do not resume.  However, global LNG volumes are unchanged for Shell due to the ramp of LNG Canada.  Oil production and sales are down a little less, but refining margins are up over 20% as it proved impossible to substitute for medium sour crude from the Middle East.  Accordingly, and in line with my Fluence note yesterday, renewable earnings are expected to be significantly higher.  Though these figures are specific for Shell, I think they represent a good minimum baseline for the impact.  Less progressive hydrocarbon majors like Exxon have reported slightly worse figures.

Going forward, I will begin by watching the Hungarian election this Sunday as a measure of progress in the peak Trump dynamic.  If Orban can maintain power in an EU nation via judiciary and press control, then that will be a signal that the same sort of abuses can continue in America and across the globe.  Over the medium term, of course, markets will continue to care more about the costs of hostilities and hydrocarbons.

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