Production in the oil-and-gas-rich Permian Basin of West Texas and New Mexico hit records recently, juicing oil company profits and easing energy supply worries, Matt writes.

Why it matters: It shows U.S. oil companies are responding to higher prices, with increased drilling and pumping after what seemed like months of foot-dragging.

Context: Russia's invasion of Ukraine generated a global oil shock in 2022. U.S. crude climbed over $120 a barrel back in March, and average gasoline prices jumped to more than $5 per gallon in June.

• Still, U.S. production in the Permian Basin — one of the most productive and cost-effective oil fields in the world — remained below 2019 levels for most of the year.
• The lack of production growth from the industry became a focus for the Biden administration, with the President comparing oil companies to war profiteers and hinting that it could push for a tax on windfall profits.

State of play: Late last year, more pumps in the Permian Basin suddenly switched on.

• Production has risen 12%, to a record 5.6 million barrels per day in January.

Between the lines: After suffering a sharp downturn in prices in 2020 due to COVID-related lockdowns (oil prices, remarkably, turned negative in April 2020) producers have become gradually convinced that global demand for U.S. crude oil will stay strong, which is prodding them to boost production.

What they're saying: In the Fed's most recent Beige Book — where regional reserve banks report on economic conditions in their districts — Dallas officials wrote that business leaders "seemed confident that crude oil markets will remain tight for the next several years, keeping oil prices in the $80 to $90 per barrel range, which is high enough for most District producers to profitably drill new wells."

Yes, but: While oil production in the Permian Basin is booming, other fields have been relatively neglected. That means overall U.S. oil production has inched up at a much slower pace — it's about 6% higher now than it was a year ago.

• But the Energy Information Administration forecasts that the boom in the Permian will help push overall production to a new record of 12.4 million barrels per day this year.

Go deeper: The Financial Times has a nice on-the-ground report about what the boom feels like in southeast New Mexico (subscription required).

⬆️ Bank of England raised interest rates a half point, saying more increases may be needed. (Bloomberg)

📈 Shell's 2022 profit more than doubled to a record $40 billion. (Reuters)

💸 More Americans tapping 401(k)s for financial emergencies. (WSJ)

Emerging market debt and equities have rallied over the last few months, Axios' Kate Marino writes.

• The main driver? China.

Why it matters: It’s another example of how the world's second-largest economy sets the pace for the rest of the globe — or at least that’s what investors are banking on.

• China’s reopening from punitive COVID-related lockdowns last year has invigorated growth prospects across the emerging market landscape, and investors don’t want to miss out on potential gains after the dismal returns of 2022.

What they’re saying: “Things started rallying mainly on the back of China reopening back in November. That plus more benign inflation coming out of the U.S. really changed the whole mindset toward EM,” Reza Karim, investment manager for EM fixed income at Jupiter Asset Management, tells Axios.

State of play: Inflows to EM stock and bond funds hit record rates in January.

• Since last November, EM equities have gained nearly 21% — after shedding 29% from January to October, as measured by the iShares MSCI Emerging Markets ETF.
• EM sovereign bonds are up 10.6% in the last three months, after a negative 16% return over the prior 10 months, using the JPMorgan Emerging Market Bond Index as a proxy.

The big picture: Chinese assets make up a huge portion of the EM investing universe.

• In addition to ending the economically constricting COVID-zero policies, the government is also easing crackdowns on key areas like real estate and tech, boosting the value of assets in those areas.

Meanwhile, other EM countries stand to benefit, too.

• Chinese households have socked away hundreds of billions in excess savings that are now getting spent — particularly on tourism outside the country, Karim says.
• Reopening vibes are also lifting commodities prices — and many EM corporates are commodities-tied producers or exporters that stand to gain, he adds.

What we're watching: How long these gains will last, especially with U.S. recession fears swirling. As Bloomberg reports, the commodities boost is already showing signs of slowing.

"We can now say, I think, for the first time that the disinflationary process has started."

Between the lines: Powell's nod to slowing inflation lifted the spirits of investors, who hope it means the Fed is nearly finished with the series of rate hikes that battered markets last year.

Yes but: Powell seemed to throw cold water on hopes that the Fed might even cut rates sometime soon.

• "The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done," Powell said.

The bottom line: The S&P gained 0.9% yesterday. The Nasdaq rose 1.9%.