Highlights
U.S. equities posted their third consecutive week of gains, with the Nasdaq Composite leading the charge adding more than 6%, while the S&P 500 gained 4.54% in the week. For the third week in a row, large-cap growth stocks outpaced value stocks, buoyed in large part by continued excitement around companies linked to artificial intelligence. Developments in the Middle East remained front and center for investors throughout the week. Market confidence was bolstered by the ongoing ceasefire between the U.S. and Iran, as well as optimism surrounding continued diplomatic talks between the two nations. Sentiment received a further boost on Friday when Iran’s Foreign Minister Abbas Araghchi announced that the Strait of Hormuz was fully open to commercial shipping, following a ceasefire agreement between Israel and Lebanon. This announcement also contributed to a steep drop in oil prices. On the corporate earnings front, the initial batch of first-quarter results from several of the country’s largest banks was received positively. Bank executives also painted an encouraging picture of the current economic environment, with consumer spending drawing particular praise. Turning to economic data, wholesale inflation came in below expectations in March. The Bureau of Labor Statistics reported that its Producer Price Index climbed 0.5% on a monthly basis, falling short of the roughly 1% increase that had been forecast and matching February’s upwardly revised figure. The muted reading was largely attributable to flat inflation in the services sector, even as a sharp jump in energy prices pushed goods inflation higher. Separately, the pan-European STOXX Europe 600 Index closed the week 2.12% higher, as investors processed incoming corporate earnings and reacted to Iran’s pledge to reopen the Strait of Hormuz. The International Monetary Fund lowered its economic growth projection for the eurozone, cautioning that the Middle East conflict could spark a severe energy crisis if a lasting resolution is not reached in short order. The fund now expects the eurozone economy to expand by 1.1% in 2026, a downgrade from the 1.3% growth it had forecast back in January. On a more positive note, the UK economy surprised to the upside in February, expanding 0.5% on a monthly basis, far outpacing the 0.1% growth that economists had expected. However, despite the stronger monthly performance, the IMF cut its 2026 UK growth forecast to 0.8% from 1.3%, the largest downward revision the fund made to any G7 economy. In Asia, Japanese stock markets finished the week in positive territory. The Nikkei 225 Index rose 2.73% and reached a new all-time high. Stocks advanced through much of the week as investors grew cautiously hopeful that ceasefire progress could lay the groundwork for broader diplomatic engagement between the U.S. and Iran. However, the Bank of Japan appeared to step back from signalling an imminent rate hike, with Governor Ueda pointing to uncertainty around energy price shocks and the competing risks of inflation on one side and slower growth on the other. Finally, Chinese equities managed modest gains during the week, supported by stronger-than-expected economic data, though upside was limited as ongoing Middle East tensions and volatile oil prices kept investors somewhat cautious.
Data Highlights
U.S. PPI YoY (Mar) rose +60bps to 4%, below the expected 4.6% landing. U.S. Core PPI YoY (Mar) stayed flat at 3.8%, against the expectation of an increase to 4.6%. U.S. Import Prices YoY (Mar) rose +110bps to 2.1%, higher than the expected 2%. U.S. Export Prices YoY (Mar) rose +180bps to 5.6%, less than the expected 5.9%. Britain’s GDP YoY (Feb) rose +30bps to 1%, against the expected drop to 0.6%. Europe’s Inflation Rate YoY (Mar) rose +70bps to 2.6%, above the expected 2.5% landing. Europe’s Core Inflation Rate YoY (Mar) fell -10bps to 2.3%, in line with expectations. Australian Unemployment Rate (Mar) stayed flat at 4.3%, in line with expectations. China’s GDP Growth Rate YoY (Q1) rose +50bps to 5%, above the projected 4.8%. Chinese Unemployment Rate (March) rose +10bps to 5.4%, against the expected drop to 5.2%.
Week Ahead
CAD Inflation Rate YoY (Mar), CAD Core Inflation Rate YoY (Mar), CAD CPI YoY (Mar), CAD Core CPI YoY (Mar) – Monday | NZD CPI YoY (Q1) – Tuesday | GBP Unemployment Rate (Feb), GBP CPI YoY (Mar), GBP Core CPI YoY (Mar) – Wednesday | AUD Unemployment Rate (Feb) – Thursday | JPY CPI YoY (Mar), JPY Core CPI YoY (Mar) – Friday
