Global Markets Weekly Update

U.S.

Stocks largely shrugged off the stream of sometimes conflicting headlines about the war in the Middle East and a surprisingly hawkish Federal Reserve policy meeting to post solid gains in most major indexes. Large-cap stocks outpaced small-caps, and value outperformed growth as another increase in oil prices lifted the energy sector. The S&P 500 Index returned over 10% for the month of April, its best monthly performance since November 2020.

With more than half of the companies in the S&P 500 having reported quarterly earnings, T. Rowe Price traders noted that generally robust earnings results drove the market’s gains. This more than offset negative sentiment about the potential drag from higher prices of energy and other commodities going forward. Oil prices were volatile, and West Texas Intermediate oil (the U.S. benchmark) finished the week up more than 7%.

Alphabet, Meta highlight earnings reports

Five of the “Magnificent Seven” companies reported earnings, with financial results generally meeting or exceeding expectations for these bellwether firms. Alphabet shares jumped after the Google parent noted that strong demand for its artificial intelligence (AI) and cloud products showed that its heavy investment in AI is starting to pay off. On the other hand, Meta Platforms plummeted after it said that it will boost its AI spending by even more this year. The company issued $25 billion of new corporate bonds on Thursday.

FOMC dissenters send hawkish signal

The Federal Open Market Committee (FOMC) held rates steady, as was widely expected, with a statement that continued to note an easing bias. Three members dissented from the decision to incorporate the easing language, and one dissented in favor of cutting rates. This was the largest number of dissents during Jerome Powell’s time as Fed chair. Markets interpreted the dissents in favor of removing “easing” from the FOMC statement as a hawkish signal.

While the April FOMC meeting was Powell’s last as Fed chair, at his post-meeting press conference Powell said that he will remain on the Fed’s Board of Governors for an undetermined time period. While Powell’s term as a central bank governor runs through January 2028, it is unusual for a Fed chair to remain as a governor after their tenure as chair ends. Powell cited political interference in the form of legal actions against the Fed as the reason for his decision to stay on the Fed board.

Treasury yields increase

Treasuries were under selling pressure for most of the week, with T. Rowe Price traders saying that rising energy prices and inflation concerns primarily drove the increase in yields. (Bond prices and yields move in opposite directions.) The hawkish signals from the Fed policy meeting could have also contributed to the sell-off.

The investment-grade corporate bond market also generated negative returns, performing slightly worse than Treasuries. The beginning of the week featured heavy new issuance, although most of the new deals were oversubscribed. Our high yield bond traders noted similar weakness before improving sentiment toward risk at month-end boosted the high yield market.

Europe

The pan-European STOXX Europe 600 Index ended the week broadly flat, nudging up 0.10% in local currency terms. The corporate earnings season continued, with signs of positive earnings momentum. However, the ongoing stalled negotiations between Iran and the U.S., ongoing closure of the Strait of Hormuz and a higher oil price kept sentiment in check. Among major stock indexes, Germany’s DAX added 0.68%, and Italy’s FTSE MIB rose 1.24%. France’s CAC 40 Index declined 0.53%. The UK’s FTSE 100 Index was little changed, down 0.04%. Most European markets, with the exception of the London Stock Exchange, were closed for International Workers’ Day on Friday.

ECB leaves interest rates unchanged

The European Central Bank (ECB) held the deposit rate, its key rate, at 2% at its meeting on Thursday. However, officials acknowledge that the risks to the eurozone’s economy had “intensified” as a result of the conflict in the Middle East and that the governing council had discussed “at length an in depth” a potential interest rate rise.

Economic sentiment in the eurozone falls to lowest level since 2020

The Economic Sentiment Indicator fell in April to 93.5, its lowest level since November 2020, according to data released by the European Commission. Consumer confidence was particularly weak, while industrial and construction confidence was more resilient.

German inflation accelerates

Preliminary data indicated that consumer price inflation in Germany hit 2.9% year over year in April, nudging up from the 2.7% recorded in March. This was slightly lower than market expectations of 3% and was largely due to a surge in energy prices.

Unemployment rises in Spain

Data released this week showed that the unemployment rate in Spain climbed to 10.83% in the first quarter of 2026, which was markedly higher than expected. More encouragingly, the number of jobless people in the country was lower than the same period in 2025. 

Bank of England keeps rates on hold

In the UK, the Bank of England kept its base rate unchanged at 3.75%, as expected. In the accompanying statement, the central bank’s Monetary Policy Committee noted that prospects for energy prices are “highly uncertain” that consumer price index inflation has increased to 3.3%, and that it “stands ready to act as necessary.”

The Confederation for British Industry’s measure of retail sales fell in Aprill to -68, its lowest level since the series started in 1983.

Japan

Japan’s equity markets generated mixed performance over the week, with the Nikkei 225 declining 0.34% while the broader TOPIX gained 0.33%. Heightened currency volatility was a key market driver during the week, including a sharp yen rebound widely attributed to suspected official intervention. At the same time, evolving Bank of Japan (BoJ) policy expectations also influenced markets, as the central bank held rates steady but signaled further tightening. 

Currency markets in focus as yen surges

Currency markets came into sharp focus during the week, as the yen, which had been trading near its weakest level in roughly four decades, staged a sharp rally on Thursday, strengthening to around JPY 156.7 against the U.S. dollar, from JPY 160.1. Market participants broadly interpreted the abrupt move as indicative of official intervention, with authorities likely buying yen and selling dollars to stem further depreciation. The move followed increasingly explicit rhetoric from Finance Minister Satsuki Katayama, who had signaled that the timing for taking bold steps is nearing, particularly after the yen breached the 160 level—a threshold widely seen by markets as a trigger point for action, and one that preceded intervention episodes in 2024.

BoJ on hold as normalization pressures build

At its April 27–28 meeting, the BoJ left its key policy rate unchanged at around 0.75%, in line with expectations, but delivered a hawkish hold. The decision was split 6–3, with three board members calling for a rate hike to 1%, signaling growing momentum toward further policy normalization.

The BoJ faces a difficult trade-off as a negative supply shock—linked to the conflict in the Middle East—pushes inflation higher while weighing on growth. BoJ Governor Kazuo Ueda noted that confidence in the baseline outlook has declined significantly, while also indicating that the bank may look through supply-driven price pressures, even as risks of more persistent inflation rise. At the same time, he reiterated that the BoJ will continue to raise rates if its economic and price projections are realized, underscoring that the broader normalization path remains intact despite heightened uncertainty.

Rising inflation expectations alongside a weaker growth outlook

Reflecting this backdrop, the BoJ revised up its fiscal year 2026 inflation forecast to 2.8% (from 1.9% in January) while halving its forecast for growth over the same period to 0.5%. The combination of higher inflation forecasts and a more divided policy board points to a growing likelihood that interest rates could move higher in the coming months, depending on how economic conditions evolve. The yield on the 10-year Japanese government bond rose to 2.50%, from 2.44% at the end of the previous week.

China

Mainland equities ended the holiday-shortened week broadly stable, with sentiment supported by Moody’s revision of China’s sovereign outlook to “stable” from “negative.” The onshore CSI 300 Index rose 0.80% through Thursday, while the Shanghai Composite Index gained a similar magnitude in local currency terms, according to FactSet. In contrast, Hong Kong equities declined 0.78%, reflecting softer offshore risk appetite ahead of the Labor Day holiday. Mainland markets are closed May 1 to May 5 for Labor Day and will resume trading on May 6, while Hong Kong markets are shut May 1 and resume trading on May 4. 

Moody’s outlook upgrade highlights macro resilience

Rating agency Moody’s revised China’s credit outlook to “stable” from “negative” while affirming its A1 rating, citing resilience in growth and fiscal capacity despite domestic and external headwinds. Although it expects the government’s debt burden to increase, the agency believes downside risks are contained as low interest rates and high domestic savings will help limit debt-servicing costs. It also highlighted that China’s large and diversified economy, coupled with increased competitiveness in higher value-added sectors, will offset pressures from an aging population. China’s Finance Ministry welcomed the agency’s decision and pledged to pursue economic restructuring and strengthen fiscal sustainability. 

Politburo signals targeted support, no broad-based stimulus shift

The Communist Party’s Politburo, the top decision-making body, which sets the broad direction for economic and policy priorities, acknowledged a solid start to the year but flagged that the foundation for the country’s sustained economic recovery needs to be consolidated. It called for continued support for domestic demand, employment, and strategic industries alongside efforts to strengthen the country’s energy security. The Politburo emphasized accelerating the development of a “modern industrial system,” expanding (AI) adoption, and enhancing technological self-reliance and supply chain control.

Industrial profit growth reinforces manufacturing-led recovery

Industrial profits in China rose 15.8% year over year in March, supported primarily by equipment and high-tech manufacturing sectors. It was up from the 15.2% increase in the January-February period. Over the first quarter, industrial profits rose by 15.5% year over year, the fastest pace for the period since 2017. That said, the pickup masked a widening divergence across sectors. It reinforced the strength of China’s production and export-driven recovery, particularly in policy-supported industries such as machinery, power equipment, and advanced manufacturing. Robust AI and electronics demand drove surging profit growth for companies in sectors such as high-tech manufacturing and intelligence products, while oil and metals producers also fared well. In contrast, businesses in other segments were hurt by rising raw materials costs.

Other key markets

The United Arab Emirates

Exit from OPEC+ signals strategic and geopolitical shift in oil markets

The United Arab Emirates (UAE) announced on Tuesday that it was leaving Organization of the Petroleum Exporting Countries (OPEC) and OPEC+. The UAE’s decision to leave the group marks a significant break within one of the world’s most influential oil alliances, reflecting a fundamental disagreement over oil strategy. The UAE has increasingly favored maximizing production volumes, based on the view that global oil demand could decline over time as the energy transition progresses. In contrast, Saudi Arabia—OPEC’s de facto leader—has pushed to restrict supply in order to support higher prices, which are critical for its fiscal position. These opposing priorities have strained coordination within the group and ultimately led to the split.

The decision also underscores a broader rift between the UAE and Saudi Arabia that extends beyond oil policy. The UAE has taken a more independent stance in the region, diverging from Saudi Arabia on key geopolitical issues and signaling a shift in regional power dynamics. While oil prices have remained supported in the near term by ongoing geopolitical disruptions, the UAE’s exit raises longer-term questions about OPEC’s ability to coordinate supply effectively, increasing the risk of greater competition and price volatility in global oil markets.

Colombia

Policy surprises and preelection moves drive market volatility

Colombia faced a week of mixed signals for investors, combining proactive debt management with rising policy uncertainty. The government announced a $4.4 billion bond buyback ahead of upcoming elections, a move intended to improve its fiscal position and reduce borrowing costs. On the other hand, uncertainty increased after the high court temporarily suspended a pension reform decree that would have shifted significant private savings into the public system. Because pension funds are key buyers of government bonds, the ruling raised questions about future demand for local debt.

Additionally, the central bank unexpectedly paused interest rate hikes, suggesting growing concern about economic growth even as inflation remains elevated. The move raised concerns among investors about the central bank’s independence, as political pressure—including threats to disrupt the meeting and a potential minimum wage increase—appeared to play a role in the decision. Markets reacted cautiously: While the bond buyback initially supported debt prices, bonds and equities remained range-bound as investors weighed political and legal risks.