Global markets weekly update

U.S. stocks closed the week higher, with most indexes snapping multi-week declines. The Dow Jones Industrial Average performed best, advancing 1.2%, while the S&P MidCap 400 posted its first weekly gain since January. Large-cap tech stocks generally underperformed, weighing on the technology-heavy Nasdaq Composite, which was the worst-performing index during the week. As measured by Russell 1000 indexes, value outperformed growth for the fifth consecutive week, bringing its total year-to-date outperformance to 897 basis points (8.97 percentage points).

T. Rowe Price traders observed that trading volumes throughout most of the week were relatively light—including the lightest daily volumes this year on Thursday—as investors continued to digest changes related to new policies, economic growth forecasts, and geopolitical risks.

The highlight of the week’s economic calendar came on Wednesday as the Federal Reserve concluded its March monetary policy meeting. As was widely expected, the central bank held its policy rate steady at 4.25%–4.5%. Fed officials also indicated that they expect 50 basis points (0.5 percentage points) of rate cuts this year, unchanged from a previous projection in December. Notably, however, policymakers increased their expectations for inflation in 2025 while lowering their expectations for gross domestic product (GDP) growth. The Fed’s post-meeting statement also noted that “uncertainty around the economic outlook has increased.”

Nevertheless, takeaways from the meeting seemed to be largely positive, with Fed Chair Jerome Powell stating that the Fed’s “base case” is that the impact of tariffs will be transitory and that “most measures of longer-term expectations remain consistent with” the central bank’s 2% inflation target. Investors appeared to welcome the generally dovish tone following the meeting, with most stock indexes posting solid gains for the day.

Other economic data releases during the week seemed to provide a somewhat mixed outlook. On Monday, the Census Bureau reported that retail sales in February rose 0.2%, well below consensus estimates for a 0.7% increase. January’s reading was also revised down to -1.2%, marking the steepest decline since July 2021. On the other hand, control group sales—which feed directly into the GDP calculation and exclude several volatile categories, including automobiles and restaurants—rose 1% during the month, exceeding estimates for a 0.4% gain.

Monday also brought data from the Empire State Manufacturing Survey—a survey of manufacturers in New York that measures general business conditions—which indicated that “business activity dropped significantly” in March, while “optimism about the outlook waned considerably for a second consecutive month.”

Elsewhere, several housing market-related data releases provided a more optimistic outlook, highlighted by a better-than-expected 4.2% increase in existing home sales in February, driven by an increase in supply. February housing starts also surprised to the upside with an adjusted annual rate of 1.5 million starts during the month, up 11.2% from January, although the reading represented a 2.9% decline year over year.

U.S. Treasuries generated positive returns heading into Friday as yields across most maturities declined following the Fed’s policy meeting. (Bond prices and yields move in opposite directions.) Municipal bonds also posted positive returns, despite heavy issuance during the week. Investment-grade bond spreads tightened, and new issuance in the market was generally in line with expectations. According to T. Rowe Price traders, high yield bond market volumes were muted early in the week, and the asset class gained momentum alongside equities following the Fed meeting.

In local currency terms, the pan-European STOXX Europe 600 Index ended 0.56% higher, snapping two weeks of losses. Hopes of a boost in government spending fueled the gains, but tensions about U.S. tariffs planned for early April acted as a curb. Major stock indexes were mixed. Germany’s DAX fell 0.41%, France’s CAC 40 Index eked out a modest gain, and Italy’s FTSE MIB rose 0.98%. The UK’s FTSE 100 Index ended the week slightly higher.

The latest monetary policy statements highlighted trade-related uncertainty, with central bankers attempting to balance growth headwinds against the risk of faster inflation. Several policy announcements emphasized the cloudier economic outlook, with some central banks adopting a wait-and-see approach.

The Bank of England held interest rates at 4.5%, as expected. Only one of the nine rate setters voted for a reduction, which was seen as a hawkish signal by the market, which had anticipated a 7–2 split. Policymakers expressed concerns over high inflation expectations.

Sweden’s Riksbank kept its benchmark rate at 2.25% after recent data showed that inflation remained above target. Governor Erik Thedéen indicated that rates were likely to remain unchanged through early 2028 but also said the bank was ready to act if necessary.

The Swiss National Bank (SNB), however, cut its policy interest rate by a quarter of a percentage point to 0.25%, citing low inflationary pressure and increased downside risks. SNB President Martin Schlegel indicated further rate cuts are unlikely.

Speaking at the European parliament, European Central Bank (ECB) President Christine Lagarde said the ECB would remain vigilant because of the uncertainties stemming from rising trade tensions. She also said that a proposed U.S. tariff of 25% on European imports would lower eurozone economic growth by 0.3 percentage points in the first year, with the hit to gross domestic product increasing to about half a point if Europe were to respond in a similar manner. She added that inflation could pick up by about 0.5% due to retaliatory measures and a weaker euro.

Tomasz Wieladek, T. Rowe Price Chief European Economist, expects the ECB to reduce the deposit rate by a quarter point twice more this year, probably at the early April meeting and in June. He says there is a risk that the ECB could go lower in the short term if there is a trade war between the European Union and the U.S.

Japan’s stock markets rose over the week, with the Nikkei 225 Index gaining 1.68% and the broader TOPIX up 3.25%. Foreign investor interest helped lift the shares of Japanese trading companies. The Bank of Japan (BoJ) adopted a cautious stance, holding rates steady as it assesses the potential impact of higher U.S. tariffs on Japan’s economy.

The yen weakened to the low end of the JPY 149 against the U.S. dollar range from about JPY 148.6 at the end of the previous week. The yield on the 10-year Japanese government bond fell to 1.52% from the prior week’s 1.54%.

At its March 18–19 monetary policy meeting, the BoJ kept its short-term policy rate on hold at 0.5%, as expected. The BoJ’s economic and price outlook was broadly unchanged, with the central bank maintaining the view that monetary policy will be tightened if the price outlook develops in line with its forecast. BoJ Governor Kazuo Ueda also noted concerns on trade policies as a risk to the outlook. Investors continued to anticipate that the pace of rate hikes by the BoJ would be gradual.

Data appeared to reinforce the case for further interest rate increases. Japan’s core consumer price index rose 3.0% year on year in February, ahead of consensus for 2.9% but slowing from January’s 3.2%. The first takeaways from Japan’s spring “shunto” labor-management wage negotiations indicated a steady wage growth trend.

The BoJ is watching for an intensification in a virtuous cycle between wages and prices boosting inflation expectations. In its statement on monetary policy, the BoJ cited two factors that are likely to exert upward pressure on consumer inflation through fiscal 2025—rice prices are likely to be at high levels, and the effects of the government’s measures pushing down inflation will dissipate.

Mainland Chinese stock markets fell as investors turned cautious after two weeks of gains. The onshore benchmark CSI 300 Index fell 2.29%, and the Shanghai Composite Index shed 1.60% in local currency terms, according to FactSet. In Hong Kong, the benchmark Hang Seng Index declined 1.13%.

China released a batch of better-than-expected indicators showing that the economy started the year on solid footing. Retail sales rose 4.0% in the January-February period from a year earlier, marking the quickest growth rate since November. Industrial output grew 5.9% year on year in the first two months of the year, slowing from December’s 6.2% expansion but still surpassing forecasts. Fixed asset investment—which includes property and infrastructure investment—increased 4.1% in the January-February period year on year, above expectations and December’s 3.2% pace. China’s statistics bureau combines data for January and February to smooth out distortions caused by the irregular timing of the Lunar New Year holiday.

Other data signaled areas of weakness in the economy, however. Property development investment sank 9.8% in the first two months of 2025 year on year after falling 10.6% in December, according to the statistics bureau, indicating that China’s yearslong property slump has yet to bottom. The urban unemployment rate climbed to 5.4%, the highest level in two years, Reuters reported.

Several brokerages upgraded their gross domestic product forecasts for China following the data release, reflecting confidence that Beijing can meet its annual growth goals despite the risk of an escalating U.S. trade war. At the National People’s Congress meeting earlier in March, China pledged stronger fiscal and monetary support for the economy and stated that boosting consumption was the government’s top priority for 2025. It also set an economic growth target of about 5% for the third straight year.

Turkish stocks and the lira tumbled after authorities detained Istanbul Mayor Ekrem İmamoğlu on allegations of corruption and aiding a terrorist organization. The news sparked concerns about the political environment and rule of law in the country. İmamoğlu had defeated candidates from President Recep Tayyip Erdoğan’s party in the 2019 and 2024 mayoral elections and was set to represent the opposition party in the next presidential race, which is slated to take place by 2028. The day prior to İmamoğlu’s detention, news broke that his college degree—a prerequisite for running for president—had been revoked because of questions about his transfer to the university from another school.

As expected, Brazil’s central bank lifted its benchmark interest rate by a full percentage point to 14.25%, the highest level since October 2016. All told, the central bank has tightened monetary policy by 375 basis points over its past five meetings. The accompanying statement highlighted the potential for an additional rate increase at the central bank’s next meeting, albeit smaller than the most recent hike. Policymakers indicated that the magnitude and duration of the tightening cycle will hinge on inflation and economic data while highlighting U.S. trade and monetary policy as sources of uncertainty.