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Strategic oil reserves, Apple chips and inflation running hot.Strategic oilOil futures dropped after reports the Biden administration is con [View in browser]( [Bloomberg]( Strategic oil reserves, Apple chips and inflation running hot. Strategic oil Oil futures dropped after reports the Biden administration is [considering]( a massive release from America's strategic reserves. At about 1 million barrels a day for several months, the drawdown may amount to as much as 180 million barrels. President Joe Biden is expected to make the formal announcement when he speaks about his efforts to reduce energy prices on Thursday. Meanwhile, OPEC+ will likely only approve a [modest]( increase in supply at today's meeting that's seen as insufficient to fill in the supply gap left by Russia. How do you think oil perform next quarter? Please send your opinions to marketslive@bloomberg.net Apple chips Apple is [exploring]( new sources of memory chips, including its first Chinese producer of the critical component that goes into iPhones. The company is keen to diversify its supplier network after a disruption at a key Japanese partner exposed the risks to its global supply. It's now testing sample chips made by Hubei-based Yangtze Memory Technologies Co., owned by a Beijing-backed chipmaker. Hot inflation It's all about inflation in Europe. Headline numbers for March in Germany and [France]( rose to a record, while Spain's climbed to levels not seen in almost four decades. Those spiraling numbers mean that the European Central Bank's 5.1% inflation forecast for this year is under threat of being upended. But a revision to those numbers may also herald in shift in the ECB's policy stance to more hawkish, and markets are losing no time in pricing 50 basis points of tightening this year. Stocks slip European [stocks faded]( an initial push higher to post small losses. The Stoxx 600 dropped 0.2% with retailers the outperforming sector. S&P futures traded close to unchanged on the session. Bonds drifted higher with Germany leading price gains. 2-year German yields returned below 0%, 10-year Treasury yields slip before stalling close to 2.31%. The energy space traded poorly with WTI crude maintaining Asia's losses. European natural gas fell as top consumer Germany signalled Russia is softening its demand for ruble payments. Precious metals and much of the base metals complex traded heavy. Coming up... The final trading day of the first quarter has a fairly full data calendar including the weekly U.S. Jobless Claims release, PCE Deflator as well as Personal Income and Spending alongside Canada's January GDP release -- all crossing at 8:30 a.m New York time. The March MNI Chicago PMI print is due at 9:45 a.m. Scheduled Fed speakers include John Williams at 9 a.m. With energy prices a current hot topic, today's OPEC+ gathering should garner some attention, as will scheduled comments from President Biden who will speak on efforts to lower gasoline prices at 1:30 p.m. The EIA will release their Natural Gas Storage Change data at 10:30 a.m. Walgreens Boots Alliance Inc. and BlackBerry Ltd. are among the companies reporting. What we've been reading Here's what caught our eye over the past 24 hours. - [Profits soar](as U.S. corporations have best year since 1950. - Shanghai will [lock down 16 million]( in toughest virus test yet. - Jamie [Dimon collects $56 million]( after old incentive snowballs. - [Chris Rock]( tells audience he’s “still processing” Will Smith’s slap. - Apple and Meta gave [user data to hackers]( who used forged legal requests. - Giant [Ronin bridge hack]( could change how VCs invest in crypto. - [Russia plays down peace talks](, steps up eastern assualt. And finally, here’s what Joe’s interested in this morning The yield curve is close to an inversion, and of course people are debating whether it's a sign of a recession in not-too-distant future. Others, of course, dismiss the signal, and think it's track record is dubious, and the theory is unsound. So what's the yield curve inversion all about? And why should it be taken seriously? Here's three things to consider. 1) The first thing is simple. Here's a chart you've no doubt seen tons of times in recent days. It shows that when the 2-10 spread turns negative (which means that when the yield on two year government bonds is higher than the yield on 10-year government bonds, a recession (shaded in red) seems to follow. Even if you didn't know what the 2-10 spread was, or you had no idea why it was a thing, just based on history alone, you'd look at that chart and say, hey, when this things drops below zero, recessions seem to happen. So it'd be weird to be too dismissive of it, now that it's so close to the line. 2) Ok. What about the theory. Why should this line have any predictive power or be a signal of anything? Well one way to think about Treasury yields is that they reflect the expectations of the Fed policy path over the length of their maturity. So if the 2-year is trading at 2.32%, it means the market is expecting that on average, over the next two years, the Fed's policy rate will be 2.32%. If the 10-year yield is at 2.35%, that reflects market expectations that Fed policy will average 2.35% over the next 10 years. There might be some other fudge factors, but this is the core of what government rates are telling you. Anyway, if you get into a situation where the long term rate is lower than the short term rate, and you accept the premise that rates are the market's expectation of policy, then that means the market is pricing in rate cuts at some point in the future. And the primary reason the Fed would cut rates is because it's worried about a recession. So it stands to reason that if the market is pricing in rate cuts, and rate cuts occur due to recession fears, then the market is on some level predicting a recession. So beyond the mere fact that inversions tend to precede recessions, there's also at least some reasonable theory behind it. 3) So now the issue is that while the yield curve may have a decent track record. And while there may be a reasonable theoretical explanation for how it works, this does not look like an economy that's headed for recession. The labor market is growing rapidly. Spending remains robust. Households have great balance sheets. Where's the recession? On the flipside, consumer sentiment is absolutely garbage right now. It seems plausible that this negative sentiment will filter down into consumer spending. Gasoline prices have soared. Many categories of goods have become less affordable. And on top of that, you have a Fed that's absolutely committed now to getting inflation down. Now if inflation is largely due to transitory factors, then maybe the Fed won't have to slam the brakes to hit its goals, and everything will be smooth. But if inflation is more entrenched, and spreading across categories, due to a snowballing effect of spending and income growth begetting spending and income growth, then the Fed might have to really work hard to bring inflation down to target. And the straightforward way that Fed policy can bring inflation down is by weakening the labor market and household incomes. It all depends on how hard the Fed has to go to get inflation down to target. So bottom line, when it comes to the yield curve, it has a decent history of forshadowing recessions. There's sound theory for why an inversion signals recession, and even though the economy is growing rapidly, there are certainly some headwinds. As such, it's worth taking a potential inversion seriously if it does occur on any kind of sustained basis. Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwart]( Special Daily Brief: Russia's Invasion of Ukraine [Keep up with the latest news]( on the Russian invasion of Ukraine, one of the worst security crises in Europe since World War II. Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Follow Us Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. You received this message because you are subscribed to Bloomberg's Five Things - Americas newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. 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