Trading Day: Oil and yields up, up, and away

ORLANDO, Florida, March 11 (Reuters) - Oil prices rose sharply on Wednesday despite a record release of global crude reserves, stoking inflation fears and lifting two-year Treasury yields to the highest since September. The weight on stocks was too much, and Wall Street ended mostly lower.

In my column today I sketch out why structurally higher oil prices are bad news for U.S. corporate earnings, as businesses and consumers face far higher direct and indirect energy costs than they were budgeting for.

If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today. 1. Iran tells world ’get ready for $200 a barrel’ 2. IEA announces record release of strategic stocks inresponse to Iran war oil price surge 3. Historic oil reserve release is only a band-aid on agaping supply shock: Bousso 4. US consumer inflation steady before Iran conflict drivesup oil prices 5. JPMorgan marks down value of loan portfolios of someprivate credit groups, source says

Today’s Key Market Moves * STOCKS: Japan up 1%-1.5%, a sea of red across Europe -STOXX 600 index -0.6% - and Wall Street closes mostly lower,although Nasdaq ekes out negligible gain. * SECTORS/SHARES: Eight S&P 500 sectors fall, led byconsumer staples -1.3%. Energy +2.5%. Private credit firmsunderperform - KKR, Apollo, Blackstone down 2%-3%. Oracle +9%,Chevron +3%; Visa, Boeing -1.7%. * FX: Dollar index +0.4%, dollar/yen nudges 159.00,highest since January. In emerging markets, THB, ZAR -1%. * BONDS: U.S. yields jump. Two-year yield highest sinceSeptember near 3.65%, 10-year yield highest in a month above4.22%. Soft 10-year auction, but foreign demand is strong. * COMMODITIES/METALS: Oil leaps 5%. Silver -3%, leadingprecious metals decline, U.S. copper -1%.

Today’s Talking Points

* Private credit strains deepen

Worries about the health of the $2 trillion private credit market continue to deepen. The latest red flags: JPMorgan reducing the value of some loans to private credit funds, and reports of Cliffwater’s flagship private credit fund capping redemptions.

Scarce or nonexistent liquidity, opaque pricing, limited transparency and spiking redemptions - this is how investors are increasingly viewing the sector. That may not be a wholly fair assessment, but right now the bar to convincing them otherwise is getting higher.

* Oil can’t get no relief

Oil prices spiked 5% on Wednesday, the same day the International Energy Agency agreed to release 400 million barrels of reserves in response to the crisis, the largest such move in its history.

You can look at oil’s reaction in two ways. It was equivalent to ’buy the rumor, sell the fact’, as crude plunged the day before when this move was flagged. Or, it shows supply fears run much deeper than thought, and we are in for a sustained period of significantly higher prices.

* Japan FX intervention risks rise

The Japanese yen is weakening rapidly, and is now within sight of 160 per dollar. It’s at levels that prompted the New York Fed to ’check rates’ in dollar/yen in January, seen as a warning of potential joint U.S.-Japanese intervention to support the yen.

Tokyo is in a bind though. Safe-haven demand is driving the dollar higher across the board, and yen sentiment is particularly bearish because Japan imports 95% of its energy, which is now much more expensive. Would intervention be warranted if the ’fundamentals’ justify a weaker yen?

What could move markets tomorrow? * Developments in the Middle East * Energy market moves * India inflation (February) * Bank of England Governor Andrew Bailey speaks * European Central Bank * Brazil inflation (February) * Canada trade (January) * U.S. Treasury sells $22 billion of 30-year bonds atauction * U.S. weekly jobless claims * U.S. trade (January) * U.S. Federal Reserve Vice Chair for Supervision MichelleBowman speaks on banking regulation and capital rules

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