Highlights
U.S. stock markets ended a volatile week lower, influenced by geopolitical tensions, fluctuating oil prices, ongoing inflation concerns, and a more hawkish interpretation of recent Federal Reserve signals. The Dow Jones Industrial Average shed 2.09%, followed closely by the Nasdaq Composite, which declined 1.98%. Within the S&P 500, the energy sector stood out as the top performer, benefiting from rising oil prices amid concerns over supply disruptions linked to tensions in the Middle East. Meanwhile, U.S. Treasury yields moved higher overall, with the 10-year yield climbing to about 4.38% by week’s end. The Federal Reserve concluded its March policy meeting by keeping the federal funds rate unchanged at a range of 3.50% to 3.75%, marking the second straight meeting without a change. Updated projections indicated that officials still expect one rate cut later in the year, while their forecasts for both inflation and economic growth were revised upward. During the post-meeting briefing, Chair Jerome Powell highlighted elevated uncertainty, partly driven by geopolitical risks in the Middle East and the possibility of an energy-related shock that could influence inflation expectations. Adding to inflation concerns, the Bureau of Labor Statistics reported that producer prices rose faster than expected in February. The Producer Price Index increased 0.7% from the previous month—the highest rise since July 2025—while the annual rate climbed to 3.4%. Across the Atlantic, European markets declined notably, with the STOXX Europe 600 falling 3.61% for the week. Investor sentiment was weighed down by escalating Middle East tensions, including attacks on oil tankers in the Strait of Hormuz and damage to gas infrastructure in Qatar. In a similar fashion, the European Central Bank left interest rates unchanged but signalled vigilance in response to rising energy costs. President Christine Lagarde warned that higher oil and gas prices could significantly impact near-term inflation. The ECB also raised its 2026 inflation forecast to 2.6%. Economic indicators across Europe were generally soft. The eurozone’s trade balance shifted to a deficit of EUR 1.9 billion in January, driven largely by declining exports in key sectors such as machinery and chemicals. Business sentiment in the UK also weakened, as a report from Make UK highlighted falling domestic demand and rising costs. Shifting the focus to Asia, Japanese equities declined in a shortened trading week, with the Nikkei 225 down 0.83% and the TOPIX slipping 0.54% as ongoing geopolitical tensions and oil price volatility continued to weigh on investor sentiment. Following the trend set by its peers, the Bank of Japan kept its policy rate unchanged at 0.75%, though the decision was not unanimous. The central bank emphasized the need to closely monitor global developments, particularly rising energy prices, which could push inflation higher after a temporary slowdown. Finally, Chinese stock markets closed the week lower as investors weighed higher energy prices alongside ongoing concerns about weak domestic demand and limited policy stimulus. The CSI 300 fell 2.19%, and the Shanghai Composite Index dropped 3.38%.
Data Highlights
USD PPI YoY (Feb) rose +50bps, from 2.9% to 3.4%, +50bps larger than the flat expectations. USD Fed Interest Rate Decision stayed the same at 3.75%, in line with expectations. CAD Inflation Rate YoY (Feb) fell -30bps, from 2.3% to 1.8%, -10bps decrease from the 1.9% expected. CAD Interest Rate Decision stayed the same at 2.25%, in line with expectations. CAD PPI YoY (Feb) fell -20bps, from 5.6% to 5.4%, +-10bps less than the 5.5% expected. EUR Interest Rate Decision stayed the same at 2.15%, in line with expectations. EUR Inflation Rate YoY (Feb) rose +20bps, from 1.7% to 1.9%, in line with expectations. GBP Interest Rate Decision stayed the same at 3.75%, in line with expectations. GBP Unemployment Rate (Jan) stayed the same at 0.75%, expectations wrongly assumed a +10bps increase to 5.3%. JPY Interest Rate Decision stayed the same at 0.75%, in line with expectations. AUD Interest Rate Decision rose 25bps, from 3.85% to 4.1%, in line with expectations. AUD Unemployment Rate (Feb) rose +20bps, from 4.1% to 4.3%, +20bps larger than the flat expectations. ZAR Core Inflation Rate YoY (Feb) fell -40bps, from 3.4% to 3%, -30bps less than the expected 3.3% landing.
Week Ahead
JPY Inflation Rate YoY (Feb) – Tuesday | AUD Inflation Rate YoY (Feb), GBP Inflation Rate YoY (Feb), GBP Core Inflation Rate YoY (Feb), ZAR Interest Rate Decision – Wednesday
