Bond markets are gradually calming down after Thursday’s inflation shock, but stocks are opening lower again. This comes amid concerns that the Federal Reserve will act tighter and faster to reduce inflation than previously expected. ECB chief Christine Lagarde is trying to restore calm to eurozone bond markets with a more dovish message. The Michigan Consumer Sentiment Index with its inflation expectations gauge tops the data calendar, while oil prices are rising again after the International Energy Agency said global oil demand has been understated for the past three years. Everything you need to know about the financial markets on Friday, February 11.

1.Bonds are corrected after Ballard’s abrupt announcement

The 10-year Treasury yield is set to open above 2% for the first time in three years, while the 2-year bond yield is at 1.60% after another upward reassessment of U.S. interest rate expectations on Thursday.

While markets initially took January’s 40-year high in inflation fairly calmly, they got another scare when St. Louis Federal Reserve President James Ballard told Bloomberg he wants tightening by as much as 100 basis points by July 1.

Ballard comes from a relatively fringe viewpoint on the Federal Open Market Committee, but he is a voting member this year, and more importantly, the fact that he has become hawkish in front of the council in Washington, D.C., gives the impression that he is a leading indicator of the Fed’s policy direction. Thus, his words are having a greater impact on the markets than usual.

2. Lagarde tries to smooth bond market waves, UK economy ignores Omicron

It’s a very different story in the eurozone, where ECB chief Christine Lagarde had to resort to yet another long interview canceling out the policy signals she gave at her press conference last week.

Lagarde said there was no need to act too hastily and said “all our actions will be gradual,” starting with a reduction in asset purchases in April. Her more conciliatory tone allowed a major sale of Italian bonds to proceed without incident, although the 10-year bond yield spread with Germany – a rough indicator of financial stress in the eurozone – remains at more than 150 basis points, the highest in 18 months.

Elsewhere in Europe, UK GDP fell less than expected in January, suggesting the economy has coped better with the Covid-19 wave and omicron than previously thought. However, GDP was still below pandemic levels at the end of 2019, unlike the US and much of Europe.

3. The stock is set to open lower

Bond markets may have calmed down a bit, but U.S. stocks are still under pressure and poised to open with more losses, giving the impression that this week’s gains were essentially a bear market rally.

By 6:20 a.m. ET, Dow Jones futures were down 140 points, or 0.4%, S&P 500 futures were down 0.6%, and NASDAQ 100 futures were down 0.8%. Thus, all three indices will end the week with modest losses.

4. Ontario court to rule on truckers’ protests as auto sector suffers

The Ontario Supreme Court will hear an application by the Canadian city of Windsor for a court order to free the most important road crossing between the U.S. and Canada from protesting truckers.

The Ambassador Bridge has been blocked for four days by truckers protesting the Liberal government’s vaccine and mask policies, disrupting the flow of commerce and threatening to prolong the supply chain agony being experienced by Detroit automakers in particular.

The bridge closure has already forced Ford Motor (NYSE:F) to cut production at its engine plant in Windsor and its SUV plant in Oakville, west of Toronto, the Wall Street Journal reported.

5. Mankind is burning far more oil than previously thought, says IEA

The International Energy Agency has revised its estimates of global oil demand upward, suggesting the global market is even tighter than anticipated. In its monthly report, the agency increased past baseline demand levels by 770,000-970,000 barrels per day over the past three years and raised its forecast for 2022 by 870,000 barrels per day. This makes the current low inventory levels even more apparent.

U.S. crude futures prices rose back above $90 a barrel in response to the news while Brent crude rose 0.8% to $92.13 a barrel as talk of a quick lifting of Iranian sanctions receded.

The Baker Hughes rig count, which last week hit its highest level since April 2020, will show how quickly U.S. shale producers are responding to higher prices.