CROSS ASSET: Latest Constructive Headlines From Middle East Stabilise Sentiment

• MNI: US NAR FEB PENDING HOME SALES INDEX 72.1 V 70.8 IN JAN
• US NAR FEB PENDING HOME SALES +1.8% MOM; -0.8% YOY

• -5,000 SFRJ6 96.00 puts, 0.5 ref 96.375
• +5,000 SFRU6 96.18/96.31/96.37/96.50 put condors, 5.25 ref 96.47
• +6,000 0QN6 96.75/97.00/97.18 broken call trees, 1.0-1.25

NY Fed's Business Leaders Survey for March offered an early take on the services sector's reaction to the nascent conflict in the Middle East. Current activity/inflation were little changed, but confidence in future activity dipped as expected inflation jumped.

• The headline business activity index improved a little less than expected at -22.6 (-20.0 Bloomberg consensus, -25.7 prior). Perhaps more significantly from a sentiment if not a "hard" data perspective, the report also noted that the business climate index fell -46.2, "suggesting the business climate remained much worse than normal." That was a 9-month low and a 4.5 point drop from prior. Additionally there were deteriorations across 6-month outlooks for the business climate and general activity.
• That said, capex spending was a 6-month best (or, least worst, at -2.5), and the 6-month outlook for capex jumped to a 14-month high; however current employment remained negative and near post-Covid lows.
• The current prices paid/received gauges were little changed (at elevated levels), but expected prices paid jumped the most since 2023 (13.1 points) to 65.6, the first rise after 6 consecutive monthly declines.
• There are no anecdotes included in this survey so it's hard to know what the reasoning of respondents was, but given that the survey was conducted between March 2 and 9 it's likely the outbreak of hostilities in the Middle East and pickup in energy prices affected confidence and inflation expectations but didn't have an impact on current activity.
• It's the first regional Fed services survey of the month so we will be looking for any signs of sentiment impact elsewhere from geopolitics.