Highlights
U.S. stock markets ended a volatile, news-driven week with mixed results as investors focused mainly on developments in the Middle East, fluctuations in oil prices, and continued weakness in large-cap technology shares. Stocks started the week higher on hopes that tensions in the region might ease, but those gains faded later as conflicting reports reduced confidence in a quick resolution. By the end of the week, the S&P Midcap 400 and Russell 2000 posted gains, ending four-week losing streaks. In contrast, the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all declined for a fifth straight week. Large-cap value shares outperformed growth stocks for the third consecutive week. Preliminary data from S&P Global showed that U.S. business activity slowed in March. The Flash Composite Purchasing Managers’ Index fell to 51.4, its lowest level in 11 months, from 51.9 in February. Activity in the services sector weakened the most, while manufacturing output improved slightly. The report also pointed to rising inflationary pressure. Input costs increased at the fastest pace in 10 months, and businesses raised prices at the quickest rate since 2022. Many firms linked these increases to higher energy costs and supply chain disruptions tied to the Middle East conflict. U.S. Treasury markets ended the week 1.10% higher, with yields exhibiting higher volatility midweek. Traders suggested that investors are beginning to consider the possibility of a future Federal Reserve rate hike if higher oil prices continue to intensify inflation risks. Meanwhile, European markets posted modest gains overall despite ongoing uncertainty. The STOXX Europe 600 rose 0.22% during the week, with investor sentiment heavily influenced by uncertainty surrounding the conflict in the Middle East and its implications for energy prices and regional growth. The European Central Bank indicated that it is prepared to adjust policy whenever necessary if inflationary pressures intensify. President Christine Lagarde said it remains too early to determine the full inflation impact of the Iran-related conflict, and policymakers will need to assess how severe and long-lasting those pressures become. Within Europe, overall business activity slowed. The S&P Global Eurozone Composite PMI fell to 50.5 from 51.9, with new orders declining for the first time since last summer and supply chains showing significant disruption. The UK’s annual inflation rate remained at 3% in February, according to the Office for National Statistics. At the same time, the Organisation for Economic Co-operation and Development cut its 2026 growth forecasts for Europe to 0.8% and reduced the UK’s projected growth to 0.7%, citing the effects of the Middle East conflict. Moving over to Asia, Japanese markets delivered mixed results. The Nikkei 225 ended the week essentially unchanged, while the TOPIX rose 1.1%. Elevated oil prices and ongoing conflict in the Middle East weighed on sentiment, given Japan’s heavy reliance on imported energy. Japan began releasing oil from its strategic reserves during the week to mitigate the supply chain disruptions tied to the conflict. Key to note, the yen hovered near JPY 160 per U.S. dollar by the end of the week, a level that previously prompted intervention by Japanese authorities in 2024. Finance Minister Satsuki Katayama warned that the government would take firm and potentially aggressive action if speculative currency movements continue, especially those tied to oil market volatility.
Data Highlights
USD Initial Jobless Claims (Mar/21) rose +244bps, from 205K to 210K, in line with consensus. USD Continuing Jobless Claims (Mar/14) fell -173bps, from 1851K to 1819K, -168bps less than the expected 1850K. GBP Inflation Rate YoY (Feb) stayed the same at 3%, in line with consensus. GBP Core Inflation Rate YoY (Feb) rose +10bps, from 3.1% to 3.2%, +10bps more than the expected 3.1%. JPY Inflation Rate YoY (Feb) fell -20bps, from 1.5% to 1.3%, in line with consensus. AUD Inflation Rate YoY (Feb) fell -10bps, from 3.8% to 3.7%, -10bps less than the expectations to remain flat at 3.8%. ZAR Interest Rate Decision stayed the same, at 6.75%, in line with consensus.
Week Ahead
JPY Unemployment Rate (Feb), EUR Inflation Rate YoY (Mar), EUR Core Inflation Rate YoY (Mar), EUR CPI (Mar) – Tuesday | EUR Unemployment Rate (Feb), USD ISM Manufacturing PMI (Mar) – Wednesday | CHF Inflation Rate YoY (Mar) – Thursday | USD Unemployment Rate (Mar), USD Non-farm Payrolls (Mar), USD Non-Farm Payrolls Private (Mar), USD Unemployment Rate (Mar) – Friday
