Weekly Market Recap

UK house prices rose by 0.8% YoY in March 2026, according to data from the widely watched Halifax House Price Index. This was below both the expected pace of 1.5% and the 1.2% growth recorded in February.

EU Economy Commissioner Valdis Dombrovskis announced that the EU is preparing to cut its official growth forecast for 2026 in May, citing the risk of a “stagflationary shock” ushered in by low growth and rising inflation. He noted that the war could cut 0.4% off EU economic growth this year, even if the conflict is short-lived. Dombrovskis warned that “more substantial” disturbances could shave 0.6% off the region’s GDP growth rate.

Factory orders rose 0.9% month over month (MoM) in February, a smaller gain than the 2% increase that had been expected. Gains in automotive, textiles, and metal production and processing orders helped drive the rise. Growth in foreign orders more than offset declines in domestic orders.

Services activity contracted again in France in March 2026, with the S&P Global France Services PMI falling to 48.8, below the 49.6 level registered in February. New business volumes were weak, caused by slower client spending ahead of local elections and uncertainty around the Middle East conflict. In Italy, the services sector unexpectedly entered contractionary territory in March on soft demand and rising international uncertainty.

China’s factory gate prices rose for the first time in more than three years in March, suggesting the US-Israel conflict with Iran is starting to feed cost pressures into China’s economy. The producer price index (PPI) increased 0.5% from a year earlier, exceeding expectations after 41 months of declines that were driven partly by businesses cutting prices amid intense competition. The March PPI rebound was driven primarily by higher commodity and energy prices rather than a broad-based pickup in demand. In contrast, consumer prices rose 1% in March from the year-ago period, down from the 1.3% rise in February amid a seasonal decline in consumer demand after the Chinese New Year holidays.

China’s securities regulator implemented new rules last week, tightening oversight of short-term trading by major shareholders and company executives. The China Securities Regulatory Commission said that the rules applied to shareholders with a stake of 5% or more in a single-listed company, including foreign investors, executives of publicly traded companies, and their spouses and children. The rules prohibit buying and selling the same stock within a six-month window and expand scrutiny across equities, depositary receipts, and convertible bonds, with clearer definitions and enforcement mechanisms.

Chinese leader Xi Jinping welcomed the leader of Taiwan’s main opposition party for a rare meeting in Beijing on Friday and said that the unification with the mainland was a “historical inevitability.” Xi invited Cheng Li-wun, the chair of Taiwan’s opposition Kuomintang (KMT) party, to China during the week, as Beijing has increased military exercises around Taiwan following the election of President Lai Ching-te of the ruling Democratic Progressive Party. While exchanges between KMT’s leadership and Chinese officials are not rare, no sitting KMT leader has met Xi since 2016. The visit also comes ahead of President Donald Trump’s planned visit to Beijing in mid-May.

With the worst-case scenario avoided as the US and Iran agreed to a conditional two-week ceasefire, markets staged a relief rally, driven by technology stocks and other exporters that had been hardest hit by the geopolitical turmoil. While oil and gas prices plummeted on the ceasefire deal, risks remained heightened amid continued concerns about energy supply disruptions, and the mood was one of caution ahead of upcoming negotiations.

Prime Minister Sanae Takaichi announced that an additional release from Japan’s state oil reserves would begin next month as part of ongoing efforts to ensure a stable crude supply. This follows earlier moves, since March, to draw on both national and private-sector stockpiles, aimed at mitigating oil-shock-driven price spikes and limiting the domestic impact of higher energy costs.

Accelerating petroleum prices were reflected in the latest producer price data, as the conflict in the Middle East pushed up input costs. Japan’s corporate goods price index (CGPI), a measure of wholesale inflation, rose 2.6% YoY in March, ahead of the consensus estimate of 2.3% and following February’s revised 2.1%. Petroleum was the main driver of the headline CGPI, with hydrocarbon chemicals the second-biggest contributor. Wages adjusted for inflation rose by 1.9% from a year earlier in February, the fastest since 2021, partially driven by a temporary moderation of inflation due to government utility subsidies. The consumer confidence index was 33.3 in March, below the consensus forecast of 38.3 and following February’s 39.7, indicating a sharp deterioration in household sentiment amid the surge in fuel prices.

Within fixed income, the yield on the 10-year Japanese government bond (JGB) rose to 2.43%, from 2.38% at the end of the previous week. The JGB yield hovered near its highest level since 1997, having surged since the start of the Middle East war amid expectations that higher energy costs would push up inflation in Japan, in turn increasing the likelihood that the Bank of Japan (BoJ) would raise interest rates at its April meeting.

In foreign exchange markets, the yen strengthened midweek on the ceasefire news before stabilising around JPY 159 against the US dollar, broadly unchanged on the week. The currency’s relative weakness continues to provide support to exporters but remains sensitive to shifts in rate expectations and global risk sentiment. Market direction is likely to depend on developments in Middle East negotiations as well as incoming domestic data, particularly on wages and inflation, for further signals on the BoJ’s policy path.

Australia household spending increased 0.3% MoM in February, a touch stronger than the market expectation of 0.2% MoM. The increase in spending was driven by a 0.5% MoM rise in discretionary spending, while non-discretionary spending was flat. Across categories, recreation spending was strongest (1.1% MoM), with the ABS attributing some of the rise to advanced ticket purchases for future performances.

The Bank of Canada released minutes from its 18 March meeting showing officials relying heavily on judgment to navigate conflicting signals from the war in Iran, which has driven energy prices higher and is expected to push inflation above the 2% target even as the economy struggles. The central bank held its policy rate steady at 2.25% while acknowledging it could not lose sight of trade-related risks to the economy. On the trade front, Canada's goods trade deficit widened unexpectedly to CAD 5.7 billion in February—the largest shortfall since August—driven by record-high imports, including a surge in gold purchases, while the trade surplus with the US narrowed sharply to CAD 1.7 billion from CAD 4.9 billion. Analysts noted these points as a drag on first-quarter GDP growth. The Canadian dollar experienced volatility, initially rising on hopes that the conflict in Iran might end soon, but later falling as geopolitical uncertainty persisted.

Last week, the MSCI All Country World Index (MSCI ACWI) rose 4.1% (2.5% YTD).

The S&P 500 Index rallied 3.6% (-0.1% YTD), recording a solid gain for the second week in a row as signs of de-escalating conflict in the Middle East and a subsequent drop in oil prices boosted investor sentiment. Enthusiasm around artificial intelligence-linked stocks also served as a tailwind for parts of the market, with several large-cap technology and semiconductor stocks advancing on optimism around compute demand, new model launches, and continued infrastructure spending.

Within the S&P 500 Index, energy was the only sector to post negative returns, while the consumer discretionary, communication services, and information technology segments led gains. Large-cap growth stocks outperformed their value counterparts, and small caps outpaced large caps. The Russell 1000 Growth Index returned 3.8% (-5.5% YTD), the Russell Value Index 2.9% (5.9% YTD) and the Russell 2000 Index 4.0% (6.4% YTD). The technology-heavy Nasdaq Composite jumped 4.7% (-1.3% YTD).

In Europe, the MSCI Europe ex-UK Index jumped 3.5% (3.3% YTD). Markets rallied on Tuesday after the US and Iran agreed to a two-week ceasefire. Major stock indices advanced. Germany’s DAX Index surged 2.7% (-2.8% YTD), France’s CAC 40 Index climbed 3.7% (1.5% YTD), and Italy’s FTSE MIB Index rallied 4.3% (6.4% YTD). Switzerland’s SMI put on 1.9% (1.0% YTD). The euro strengthened against the US dollar, closing the week at USD 1.17 for EUR, up from 1.15. The region’s stock markets were closed for Easter Monday.

The FTSE 100 Index in the UK gained 1.7% (7.9% YTD), while the FTSE 250 Index was up 3.5% (0.3% YTD). The British pound appreciated against the US dollar, closing the week at USD 1.35 for GBP, up from 1.32.

Japan’s stock markets rebounded strongly during the week. The TOPIX Index added 2.6% (10.8% YTD), and the TOPIX Small Index advanced 2.9% (12.5% YTD).

In Australia, the S&P/ASX 200 Index rose 4.4% (4.3% YTD) thanks to the two-week ceasefire agreement between the US and Iran. Australian government bond yields abated, reflecting expectations of less inflation risk. The Australian dollar strengthened against the US dollar by 2.5% due to improving sentiment.

In Canada, the S&P/TSX Composite increased by 1.8% (7.0% YTD).

The MSCI Emerging Markets Index jumped 7.4% (10.7% YTD). The Chinese, Indian, Taiwanese, South Korean and Brazilian markets contributed positively.

Chinese stock markets ended the holiday-shortened week higher amid hopes of easing geopolitical tensions following a US-Iran agreement on a conditional two-week ceasefire and expectations for continued negotiations. Stronger factory gate prices also lifted sentiment. The onshore CSI 300 Index, the main onshore benchmark, rallied 4.4% (0.3% YTD), while the Shanghai Composite Index surged 2.7% (0.6% YTD). Hong Kong's benchmark Hang Seng Index added 3.1% (1.4% YTD). The MSCI China Index, which primarily comprises offshore-listed stocks, rose 3.1% (-4.3% YTD). China’s mainland markets were closed on Monday for the Qingming Festival. Hong Kong markets were shut Monday and Tuesday for a combination of Easter and local public holidays.

After a sharp escalation in the conflict in the Middle East, markets shifted direction as news of a ceasefire and renewed diplomatic talks with Iran helped ease immediate geopolitical fears. At the same time, reports that Israel and Lebanon are expected to hold talks further supported the view that broader regional tensions may be stabilising. While risks have not fully disappeared—particularly around energy infrastructure—investors seemed to interpret these developments as reducing the likelihood of a wider conflict. As a result, the “geopolitical risk premium” that had briefly pushed up oil prices and pressured risk assets began to unwind.

Markets responded quickly to signs of de-escalation, with sentiment shifting decisively toward a “risk-on” environment—meaning investors were more willing to move back into stocks and other higher-risk assets.

Emerging markets (EM) equities, which had been under the most pressure during the earlier escalation, rebounded. As geopolitical concerns eased, these markets saw a strong recovery, with EM equities on track for their best weekly gains in several years. The rebound was supported by renewed investor inflows as capital rotated back into higher-risk regions. Countries like South Africa stood out, benefiting from what market participants have described as a “de-escalation trade.”

In energy markets, oil prices—which had risen sharply amid fears of supply disruptions—pulled back modestly as the ceasefire reduced immediate concerns about key transit routes, such as the Strait of Hormuz. However, prices remained somewhat elevated, reflecting lingering uncertainty and isolated incidents affecting regional infrastructure. This suggests that while tensions have eased, markets continue to price in some risk of renewed disruption.

The improvement in sentiment also extended to fixed income and currency markets. Emerging market bonds strengthened, with credit spreads tightening as investors grew more comfortable taking on risk. Reduced concerns about oil-driven inflation pressures further supported demand for EM debt. In currency markets, the US dollar weakened as sentiment improved, while many emerging market currencies—particularly higher-yielding and commodity-linked ones—recovered, reversing earlier losses.

While markets welcomed the ceasefire, the situation remains fluid. Investors remain focused on how durable the ceasefire will be, whether diplomatic progress can continue, and the ongoing risks to energy infrastructure and global supply chains. Recent incidents, such as a drone attack on a key Saudi oil pipeline, highlight that vulnerabilities remain even as broader tensions ease. For now, markets appear to be pricing in a lower probability of worst-case outcomes, which has supported risk assets. However, because the underlying geopolitical tensions remain unresolved, some caution may be warranted. In practical terms, this could mean a modest risk premium persists in energy markets, and periods of volatility could return if conditions deteriorate.

Last week, the Bloomberg Global Aggregate Index (hedged to USD) returned 0.2% (0.2% YTD), the Bloomberg Global High Yield Index (hedged to USD) 1.3% (0.9% YTD), and the Bloomberg Emerging Markets Hard Currency Aggregate Index 1.5% (0.3% YTD).

Over the week, the 10-year Treasury yield decreased by -3bps to 4.32% from 4.35% (up 15bps YTD). The 2-year Treasury yield declined by -4bp, ending the week at 3.80% from 3.84% (up 32bps YTD).

Over the week, the 10-year German Bund yield rose by 7ps, ending at 3.06% from 2.99% (up 20bps YTD). The 10-year UK gilt yield was little changed, ending the week at 4.83% (up 36bps YTD).