Weekly Market Recap

Unexpectedly, UK economic growth was flat in January, according to the country’s Office for National Statistics. This was worse than the 0.2% gain that had been anticipated, and followed sluggish growth of 0.1% in December. Services output also showed no growth during the month, with positive contributions from wholesale and retail trade largely offset by declines in administrative and support service activities.

The Bureau of Labor Statistics reported that its February core (excluding food and energy) consumer price index (CPI) rose 0.2% month-over-month (MoM), in line with consensus estimates and down from 0.3% in January. On an annual basis, core CPI held steady at 2.5%, while headline CPI rose 0.3% for the month and 2.4% year over year (YoY).

Meanwhile, the Bureau of Economic Analysis (BEA) reported that the Federal Reserve’s preferred inflation gauge, the core personal consumption expenditures (PCE) price index, increased 0.4% in January, roughly in line with expectations, while the annual rate unexpectedly ticked up to 3.1%, the highest level since early 2024.

The BEA also reported that the US economy grew more slowly than initially estimated in the fourth quarter, with the second estimate of gross domestic product (GDP) growth at an annual rate of 0.7% versus the initial estimate of 1.4%. The downward revision reflected lower exports, consumer spending, government spending, and investment.

Elsewhere, the National Association of Realtors (NAR) reported that existing home sales rose 1.7% MoM in February to a seasonally adjusted annualised rate (SAAR) of 4.09 million, exceeding consensus estimates and January’s revised pace. The median existing home price edged up 0.3% from a year earlier to USD 398,000.

The report also noted that affordability conditions improved for the eighth consecutive month, with the NAR’s Housing Affordability Index reaching its highest level since March 2022, although “there is a long way to go to return to pre-pandemic levels of transaction activity,” according to NAR Chief Economist Lawrence Yun.

Separately, the Census Bureau reported that privately owned housing starts in January came in at a SAAR of 1.487 million, up 7.2% from December’s revised figure and a 9.5% increase from January 2025.

European Central Bank (ECB) President Christine Lagarde emphasised that the institution will take the necessary steps to keep inflation under control amid rising energy prices. Lagarde also noted that Europe is better positioned to absorb the current shock than in prior years, but she acknowledged that uncertainty and volatility remain elevated.

German factory orders tumbled 11.1% MoM in January. This was a significantly larger decline than the estimated drop of around 4%. Domestic demand was particularly weak, down 16.2%, while foreign orders fell 7.1%. Official data also showed that Germany’s exports fell 2.3% MoM in January, a larger-than-expected decline. However, the country’s trade surplus widened due to lower imports.

Industrial production in the eurozone fell 1.5% MoM in January, below expectations of around 0.6% growth. This represented the largest monthly decline since April 2025 and was driven by lower nondurable goods and capital goods.

Consumer inflation accelerated to its fastest pace in over three years as Chinese New Year holiday spending boosted demand for travel and tourism services. The consumer price index rose 1.3% in February from a year earlier. Core inflation, which excludes volatile food and fuel prices, increased 1.8% YoY, the highest since March 2019. Meanwhile, producer prices remained in deflation for the 41^st consecutive month, though the pace of decline eased to its mildest since July 2024, supported by higher metals and oil prices.

China’s exports surged 21.8% in January through February from the same period a year earlier, well above analysts’ estimates, as strong global demand for technology products and electronics, partly linked to the artificial intelligence (AI) boom, helped lift shipments. China reports combined data for the first two months of the year to smooth out distortions caused by the Chinese New Year. Although exports to the US declined, this was offset by increased trade to the European Union and Southeast Asia. Imports increased 19.8%, pushing China’s trade surplus to a record USD 213.6 billion.

Chinese technology stocks advanced following reports of growing adoption of OpenClaw, an open-source AI agent capable of autonomously executing tasks. The technology has sparked investor interest in the next phase of AI, shifting from question-answering chatbots toward systems that can make and implement decisions. However, gains in the stock prices of those perceived to be early adopters or infrastructure enablers of the open-source agent moderated as some banks, brokerages, and government agencies signalled caution about its use and moved to limit employee access.

Investors watched energy markets closely as Iran-related disruptions around the Strait of Hormuz, a key shipping route for global oil, raised risks to oil supply and heightened volatility in crude prices. Japan is heavily reliant on Middle Eastern oil imports, leaving it vulnerable to supply shocks that could push up energy costs and inflation. Prime Minister Sanae Takaichi announced that part of Japan’s strategic oil reserves, held by both private companies and the government, will be released to help mitigate potential disruptions. Subsidies will also be provided to cap the rise in domestic gasoline prices.

The yield on the 10-year Japanese government bond (JGB) rose to 2.25% from 2.17% at the end of the previous week. The JGB yield neared a one-month high amid concerns that a weaker yen could push up the cost of imported goods—especially energy—if oil prices continue to rise. With the conflict in the Middle East clouding the outlook for Japan’s economy, the Bank of Japan is widely expected to hold interest rates steady at its 18-19 March meeting.

The yen weakened to JPY 159.7 against the US dollar, from JPY 157.8 at the end of the prior week. The Japanese currency hovered around its lowest levels since July 2024, when authorities last conducted a major currency intervention to counter the yen’s sharp depreciation, prompting some speculation that they could step in again. For now, the response was limited to a verbal intervention, with Finance Minister Satsuki Katayama reiterating that the government is ready to implement all possible steps on foreign exchange at any time and under any conditions, citing sharp market swings driven by oil prices and mindful of the impact currency moves may have on people’s livelihoods.

Japan’s GDP expanded in the fourth quarter of 2025 by more than initially reported, with the economy growing at an annualised pace of 1.3% versus the prior quarter, faster than the preliminary estimate of 0.2% and rebounding from the third quarter’s 2.6% contraction. The upward revision was driven by higher business investment and consumer spending.

The Westpac consumer survey showed confidence edged higher in March, rising 1.2% MoM. However, Westpac noted that sentiment weakened materially over the course of the survey week as the conflict in the Middle East escalated. Australian business conditions remained unchanged in February. The Reserve Bank of Australia Deputy Governor, Hauser, has given an unscheduled interview just prior to the start of the “blackout period” ahead of next Tuesday’s Monetary Policy Board (MPB) meeting. The Deputy Governor repeatedly front-focused concerns about additional upside risk to inflation and inflation expectations. In particular, the Deputy Governor stressed Australia’s favourable growth position as a net energy exporter.

Canada reported a brutal job loss of 83,900 in February—the worst decline since 2022—pushing the unemployment rate to 6.7% and triggering a rally in Canadian bonds as two-year yields plunged by nearly 10bps. The weak labour market data have sidelined earlier expectations for Bank of Canada rate hikes, with most economists now expecting the central bank to remain on hold despite rising oil prices and bond yields. Prime Minister Mark Carney moved closer to securing a majority government after NDP MP Lori Idlout defected to the Liberal Party on 11 March, marking the fourth opposition lawmaker to cross the floor and bringing the Liberals within reach of a parliamentary majority. Meanwhile, the Canadian dollar experienced volatility, initially strengthening as oil prices surged above USD 100 per barrel following Middle East tensions, though it later faced pressure from broad USD strength and the weak employment report.

Last week, the MSCI All Country World Index (MSCI ACWI) lost -1.7% (-1.2% YTD).

The S&P 500 Index was down -1.6% (-2.9% YTD), declining for the third straight week as ongoing conflict in the Middle East and the resulting volatility in oil markets dominated headlines. Oil prices were volatile throughout the week as investors weighed the risk of prolonged supply disruptions through the Strait of Hormuz, a major shipping route for oil, against intermittent signs of potential de-escalation.

Other sources of uncertainty—including heightened concerns around stress in private credit markets and ongoing developments in trade policy—also appeared to weigh on sentiment during the week. The Russell 1000 Growth Index returned -2.0% (-7.3% YTD), the Russell Value Index -1.4% (2.1% YTD) and the Russell 2000 Index -1.7% (0.2% YTD). The technology-heavy Nasdaq Composite retreated -1.2% (-4.8% YTD).

In Europe, amid heightened uncertainty and volatility, the MSCI Europe ex-UK Index shed -0.5% (-0.2% YTD). Investors’ focus appeared to centre on how long the conflict in the Middle East is likely to last, the trajectory of energy prices, and the possible impact on economic growth across the region. Most major stock indices retreated. Germany’s DAX Index slipped -0.6% (-4.3% YTD), France’s CAC 40 Index lost -1.0% (-2.9% YTD), but Italy’s FTSE MIB Index rose 0.4% (-1.1% YTD). Switzerland’s SMI pared -0.9% (-2.2% YTD). The euro weakened against the US dollar, closing the week at USD 1.14 for EUR, down from 1.16.

The FTSE 100 Index in the UK was little changed (4.0% YTD), while the FTSE 250 Index was down -1.9% (-1.4% YTD). The British pound depreciated against the US dollar, closing the week at USD 1.32 for GBP, down from 1.34.

Japan’s stock markets fell over the week. The TOPIX Index tumbled -2.4% (6.5% YTD), and the TOPIX Small Index dropped -3.1% (7.6% YTD).

In Australia, the S&P/ASX 200 Index fell -2.5% (0.3% YTD) as the US-Iran conflict extended into its second week. Australian government bond yields moved higher, with the curve flattening amid expectations of further policy rate hikes to contain rising inflation. The Australian dollar strengthened against the US dollar by 0.2%.

In Canada, the S&P/TSX Composite pulled back -1.6% (3.0% YTD).

The MSCI Emerging Markets Index fell -2.0% (4.9% YTD). The Indian, Taiwanese, South Korean and Brazilian markets contributed negatively.

Chinese equity markets were mixed over the week. The onshore CSI 300 Index, the main onshore benchmark, edged up 0.2% (1.0% YTD), while the Shanghai Composite Index slid –0.7% (3.3% YTD). Hong Kong's benchmark Hang Seng Index lost -0.8% (-0.3% YTD). The MSCI China Index, which primarily comprises offshore-listed stocks, added 0.5% (-3.4% YTD).

In Iran, the conflict has increasingly influenced global markets, primarily through the energy channel. Developments throughout the week—including heightened threats around the Strait of Hormuz, attacks on vessels in Gulf waters, and disruptions to regional shipping—have intensified concerns about the stability of oil supply routes. The Strait of Hormuz is a critical chokepoint for global energy trade—handling roughly one-fifth of global oil consumption—and recent disruptions have raised concerns about Middle East supply reliability, adding a geopolitical risk premium to oil prices.

In response to the escalating situation, the International Energy Agency coordinated an emergency release of approximately 400 million barrels of reserves in an effort to stabilise energy markets. The scale of the coordinated stock release reflects the magnitude of the potential supply disruption tied to the conflict and the central role energy markets play in transmitting the shock across the global economy.

Energy markets reacted quickly as geopolitical tensions intensified. Oil prices surged as traders priced in the risk of supply disruptions from one of the world’s most important producing regions. Brent crude experienced one of its largest daily price increases on record and approached USD 120 per barrel on Monday before retracing some of its gains. Prices remained elevated even after the announcement of emergency stock releases, suggesting that investors viewed the reserve draw as only partially mitigating supply risks.

The impact extended beyond crude oil into related commodity markets. Energy-linked products—including biofuel feedstocks such as palm oil and soybean oil—also moved higher as rising oil prices can increase demand for alternative fuel inputs. Industrial commodities also experienced upward pressure as higher energy costs and shipping disruptions raised concerns about broader supply chain effects.

Broader financial markets reflected a similar pattern of risk sensitivity. Rising oil prices reinforced concerns about inflation, while heightened uncertainty around energy transport routes and regional stability contributed to swings in global equity markets.

The sharp rise in oil prices has prompted several governments to introduce measures designed to cushion the impact on domestic economies. In Brazil, policymakers moved to reduce fuel taxes for consumers while also raising taxes on crude exports, suggesting an effort to both limit the domestic inflationary pass-through from higher oil prices and capture more revenue from stronger export prices.

Elsewhere, governments have signalled greater fiscal support to offset rising energy costs. Indonesia has indicated that it will absorb much of the increase in global oil prices through the state budget, expanding fuel subsidies and compensation to state energy companies to help keep domestic fuel prices stable.

The impact has also been closely watched in countries with large energy import needs, where higher oil prices can quickly pressure fiscal balances, external accounts, and household budgets. In Egypt, authorities responded by raising prices on a wide range of fuel products, including gasoline, diesel, and natural gas used for vehicles, as disruptions to Middle East energy output pushed domestic energy costs higher. South Korea has likewise signalled that it may use stronger-than-expected tax revenue to extend support measures to soften the impact of higher oil prices on households and businesses.

Last week, the Bloomberg Global Aggregate Index (hedged to USD) returned -0.7% (-0.1% YTD), the Bloomberg Global High Yield Index (hedged to USD) -0.8% (-0.3% YTD), and the Bloomberg Emerging Markets Hard Currency Aggregate Index -1.0% (-0.7% YTD).

US Treasuries generated negative returns during the week as geopolitical risk, particularly uncertainty over the Middle East conflict's duration and energy market impacts, and some firm inflation data helped push yields higher across most maturities. Over the week, the 10-year Treasury yield rose by 14bps to 4.28% from 4.14% (up 11bps YTD). The 2-year Treasury yield increased by 16bps, ending the week at 3.72% from 3.56% (up 24bps YTD).

US investment-grade corporate bonds underperformed Treasuries for the week, and as of Thursday, it was the second-largest week of issuance ever in the market. The high-yield bond market was volatile amid shifting macro headlines and moves in energy prices.

Over the week, the 10-year German Bund yield increased by 12bps, ending at 2.98% from 2.86% (up 13bps YTD). The 10-year UK gilt yield rose by 19bps, ending the week at 4.82% from 4.63% (up 35bps YTD).