Global Markets Weekly Update

U.S. 

Major U.S. stock indexes declined during the week amid ongoing concerns about the disruptive potential of artificial intelligence (AI) and heightened global trade and tariff uncertainty. The Dow Jones Industrial Average led declines, shedding 1.31%, while the S&P 500 Index held up best but still lost 0.44%.

Equities started the week on a negative note, selling off on Monday after a widely circulated research report helped amplify worries about potential AI-driven disruption risks to various industries and the broader economy. Sentiment improved on Tuesday and Wednesday ahead of AI bellwether NVIDIA’s quarterly earnings, though ultimately indexes declined through the end of the week as the chipmaker’s consensus-topping results failed to reverse the broader risk-off tone. 

Wholesale price inflation picks up; factory orders decline

On the economic data front, the Bureau of Labor Statistics reported that producer price inflation unexpectedly accelerated in January. The headline producer price index (PPI) increased 0.5% month over month, ahead of estimates for around a 0.3% rise and up from December’s reading of 0.4%. The upside was driven by services prices, which rose 0.8% for the month, the largest increase since July 2025. On an annual basis, PPI inflation came in at 2.9%.

Meanwhile, data from the Census Bureau showed that new orders for U.S. factory goods dropped 0.7% in December, down from an increase of 2.7% in the prior month. A sharp decline in commercial aircraft bookings helped drive the overall contraction. 

Consumer confidence and jobless claims inch higher

After declining in January, the Conference Board’s Consumer Confidence Index edged higher in February, increasing 2.2 points to 91.2. The month-over-month improvement was partially attributed to less pessimistic expectations about future business and labor market conditions, as well as a more positive outlook for future income. However, Conference Board Chief Economist Dana Peterson noted that the index “remained well below the four-year peak achieved in November 2024 (112.8).”

Elsewhere, applications for unemployment benefits during the week ended February 21 totaled 212,000, a modest increase from the prior week’s reading of 208,000 and in line with consensus estimates. On the other hand, continuing claims for the week ended February 14 declined to 1.833 million, a drop of 31,000 from the prior week.

Treasuries advance amid equity market weakness

The week’s broadly risk-off tone appeared to help support U.S. Treasuries, which generated positive returns as yields generally finished lower than the prior Friday. (Bond prices and yields move in opposite directions.) The yield on the benchmark 10-year U.S. Treasury note dropped below 4% for the first time since November.

Investment-grade corporate bonds underperformed Treasuries with modest gains, although T. Rowe Price traders noted that the market absorbed meaningful supply while navigating AI-related dispersion and tariff headlines. Our traders also noted that high yield bond performance was mixed across sectors, as software and AI-related names were volatile while investors mostly favored higher-quality credits.

Europe

The pan-European STOXX Europe 600 Index touched a new high and notched a 0.52% gain in local currency terms over the week. Robust corporate earnings and investors’ desire to diversify beyond the technology-heavy U.S. market won out over geopolitical tensions, concerns about AI disruption, and renewed trade tariff uncertainty. Among major stock indexes, Germany’s DAX edged modestly higher, Italy’s FTSE MIB climbed 1.59%, and France’s CAC 40 Index gained 0.77%. The UK’s FTSE 100 Index also reached a fresh high midweek and added 2.06%.

German business confidence shows signs of continued improvement…

The Ifo Institute’s Business Climate Index rose to 88.6 in February, its highest level since last summer and up from 87.6 in January. Companies participating in the survey reported greater confidence around current conditions, while expectations about the next six months also improved. The strength was fairly broad, with both manufacturers and service providers reporting higher confidence. 

… While industry confidence in France dips lower

The February reading of the main French business confidence indicator slipped to 97 from 99 in January, suggesting that there is so far little optimism about a potential economic recovery. The manufacturing component of the indicator nudged down to 102 from 105 last month.

Mixed inflation data across the eurozone

French consumer prices rose by 1.1% year over year in February, according to preliminary data released by INSEE, the country’s official statistics agency. In Spain, the initial reading of for annual inflation edged up to 2.5% from 2.4%; it had been expected to slow to 2.3%. In contrast, inflation eased in Germany, with the annual inflation rate slowing to 1.9% in February from 2.1% last month. 

Future interest rate cuts likely in the UK; investors shrug off tariff uncertainty

Bank of England Monetary Policy Committee member Alan Taylor publicly suggested that the UK’s central bank may make three more interest rate cuts in 2026, as inflation drops back to the 2.0% target.

Following the U.S. Supreme Court’s ruling on tariffs last week, investors in the UK were encouraged by the Trump administration’s assurance that it intends to stand by the trade deal it struck with the UK in May 2025.

Japan

Japan’s stock markets rose over the week, with the Nikkei 225 Index gaining 3.56% and the broader TOPIX Index up 3.42%. The indexes reached record highs to wrap up a strong February, as investors remained optimistic about the policy outlook under Prime Minister Sanae Takaichi. Markets appeared to take in stride the latest tariff announcements from the U.S., with Bank of Japan (BoJ) Governor Kazuo Ueda noting that the 15% global tariff matches existing levies for Japan and is unlikely to have a major impact on Japan.

The yen weakened to the JPY 156 range against the U.S. dollar from the prior week’s JPY 155. The Japanese currency came under pressure as Prime Minister Takaichi nominated two economists perceived as dovish, Ayano Sato and Toichiro Asada, to the BoJ’s Policy Board to replace outgoing members. Some analysts interpreted the move as a signal that her government could be in favor of a less aggressive approach to interest rate increases. This prompted some press speculation about a potential impact on the central bank’s monetary policy normalization process. Ueda said that the bank will review incoming data at its March and April meetings and will raise interest rates if its economic and inflation forecasts are realized.

Tokyo CPI tops forecasts, supporting BoJ tightening path

The yield on the 10-year Japanese government bond rose to 2.12% from 2.10% at the end of the previous week. The Tokyo-area core consumer price index (CPI), a leading indicator of nationwide trends, rose 1.8% year over year in February, ahead of estimates of a 1.7% increase and compared with 2.0% in January. The slowdown in consumer inflation was due largely to renewed electricity and gas subsidies, but the fact that the reading surpassed consensus expectations lent cautious support to the BoJ’s rate hike trajectory. Separate January data showed that retail sales beat expectations over the month, while industrial production came in weaker than forecast.

China

Mainland Chinese stock markets rose in an abbreviated trading week as risk sentiment improved, and broader market participation returned following the Lunar New Year break and ahead of the upcoming “Two Sessions” meetings. Leaders typically set key economic goals at the annual legislative gathering. The onshore benchmark CSI 300 Index advanced 1.08%, and the Shanghai Composite Index rose 1.98% in local currency terms, according to FactSet. Stock markets in mainland China were closed from February 16 to February 23. In Hong Kong, the benchmark Hang Seng Index rose 0.82%.

China Lunar New Year tourism up, per-trip spending down

Travel and spending data over the Lunar New Year, a key consumption period for China, provided mixed signals about consumer sentiment. Tourism spending rose to 803.5 billion yuan (USD 117.4 billion), 126.5 billion yuan higher than in 2025, although this year’s holiday period was a day longer. In total, domestic tourists made 596 million trips nationwide over the nine-day period, 95 million more than a year ago. However, per-trip spending dipped marginally, according to Bloomberg calculations, raising doubts about the sustainability of spending growth. 

Shanghai eases homebuying rules to support property market

China’s financial hub Shanghai has relaxed homebuying rules, adding to recent measures to boost the property market. Nonresidents who have paid social security contributions or income tax for one year will be eligible to buy a home in urban areas. Previously, nonresidents had to wait three years. Shanghai will also allow nonresidents who have made social security or income tax contributions for at least three years to purchase a second home. 

China’s central bank moves to slow yuan’s appreciation

The People’s Bank of China (PBOC) announced that it will cut the risk reserve requirement ratio for financial institutions conducting foreign exchange forward trading to zero from 20%, a move analysts say that signals efforts to ease the rapid appreciation of the renminbi. The PBOC said the adjustment takes effect March 2 and that it would aim to keep the yuan’s exchange rate stable at a reasonable and balanced level. The central bank’s move on Friday came as the Chinese currency on Thursday hit a nearly three-year high against the U.S. dollar.

Other key markets

Hungary

NBH delivers expected rate cut; political backdrop adds uncertainty

The National Bank of Hungary (NBH) lowered its key policy rate by 25 basis points to 6.25%, marking the first rate cut since September 2024. The move follows a continued decline in inflation, with headline CPI falling to 2.1% year over year in January, helped by favorable base effects and the extension of government price caps. According to T. Rowe Price emerging markets credit analyst Peter Botoucharov, inflation could pick up in the second half of the year, potentially finishing 2026 in the 3.5% to 4.0% range. Importantly, the eventual removal of price caps could add to headline inflation, which may limit the scope for more aggressive easing. Markets appeared to take the decision in stride, with limited volatility in local rates and currency markets, reflecting that the move had been largely priced in.

On the political front, attention is increasingly turning to Hungary’s parliamentary elections scheduled for April 12. Recent polling indicates that the opposition Tisza Party has widened its lead over Prime Minister Viktor Orbán’s Fidesz party, raising the prospect of a more competitive electoral outcome. While markets have not yet reacted sharply, election-related uncertainty could influence investor sentiment, particularly in local fixed income. Ahead of the vote, Botoucharov maintains a balanced view that acknowledges improving inflation dynamics but also recognizes the potential for renewed price pressures and political risk. Together, the start of a cautious easing cycle and a shifting political landscape suggest that Hungarian assets may remain sensitive to both inflation data and election developments in the months ahead.

Colombia

Election poll shift boosts left; Colombian markets brace for renewed volatility 

Colombian markets came under renewed pressure this week as political risk moved back into focus. The latest Invamer poll showed left-wing candidate Iván Cepeda gaining ground in the first round, while right-wing candidate Abelardo de la Espriella held steady. Although Paloma Valencia from former President Alvaro Uribe’s party climbed sharply and could theoretically consolidate support behind de la Espriella in a runoff, the broader right-wing bloc still trails meaningfully. Perhaps more notable, President Gustavo Petro’s approval rating jumped, suggesting that policies such as the 23% minimum wage increase are proving politically popular. As T. Rowe Price Sovereign Analyst Chris Mejia noted, the poll points to stronger-than-expected support for Petro’s policy agenda and could generate a negative market reaction in the near term.

Markets have already been sensitive to shifting election dynamics. The Colombian peso and local bonds weakened earlier in the week as investors demanded higher risk premiums amid rising uncertainty around the policy outlook. At the same time, the central bank has maintained a relatively hawkish stance, helping to cushion the currency in the short term but doing little to offset concerns about fiscal pressures and the broader reform path. Proposals to tap pension assets to help address budget strains have further underscored fiscal challenges. Looking ahead, markets are likely to remain headline driven, with currency and rates volatility tied closely to polling trends and clarity around the next administration’s economic direction.