North America
Although uncertainties remain on future US inflation rates, economic growth and trade policies, US equity indices posted positive returns for the first time in five weeks, after markets reacted positively to the US Federal Reserve’s (US Fed) decision to maintain Interest Rates at the current rates and its expectations for two rate cuts later this year. The S&P 500 Index rose 0.5%, with the S&P 500 equal weighted index edging out further with a 0.67% return, as the Magnificent 7 stocks trade at their lowest valuation premium to the rest of the S&P 500 since 2017, despite new announcements on increased AI spending. Other major US indices also closed the week in positive territory with the Nasdaq Composite, Russell 2000 and the Dow Jones Industrial Average indices rising 0.2%, 0.7% and 1.2% respectively. Meanwhile, US Treasury yields slid last week after FOMC commentary indicated the potential for further rate cuts in 2025. The 2-Year and 10-Year US Treasury yields ended the week at 3.95% and 4.25%, respectively. The US Federal Open Market Committee’s (FOMC) post-meeting statement noted that uncertainty around the US economic outlook has increased, with the median Summary of Economic Projections forecasting higher core inflation and unemployment rate for 2025, as well as a lower GDP growth forecasts across 2025 to 2027. Consequently the target interest rate was maintained at 4.25% to 4.50%, with expectations for two interest rate cuts this year. The FOMC did choose to slow the pace of quantitative tightening by $20bn per month. US consumer sentiment remains fragile as US core retail sales rose 1.0% in February, well above consensus expectations, but headline spending rose 0.2%, below consensus expectations. Core retail sales growth was weakest at clothing stores, sporting goods stores, and miscellaneous store retailers, and strongest at non-store retailers, and health and personal care stores.

Europe & UK
Momentum for European equity indices remained positive, with the pan-European STOXX Europe 600 Index closing 0.6% higher in local currency terms. With Energy, Retail and Utilities sectors the primary contributors to performance, export orientated sectors such as Basic Resources, Chemicals and Automotive dragged on performance as investors remain concerned over future US tariffs on the Euro Area. Airline and Travel stocks also declined during the week as investors reacted negatively to the sudden closure of London’s Heathrow airport, following an extensive nearby fire that cut power to the hub. Broad sentiment for European equity indices remains fragile. While inflation rates for the Euro Area in February came in at 2.3% YoY, below consensus expectations, core inflation rose by 2.6% YoY, with Services inflation remains the main driver, contributing 1.7% YoY in February, adding to concerns that inflation for the Euro Area remains sticky. At a regional level, France’s CAC 40 Index closed out marginally positive, returning 0.2% over the week. Meanwhile Germany’s DAX closed in negative territory, falling 0.4% as of Friday. Although Germany’s equity index has been boosted by the prospect of hundreds of billions of Euros in debt-financed defence and infrastructure spending, which German lawmakers in the Upper House of Parliament in Berlin approved on Thursday, renewed concerns over US Tariffs dragged on performance. A recent social media post by US President Donald Trump announced 2 April 2025 as “Liberation Day”, indicating a potential date for US tariffs to be imposed against the EU, which could significantly impact Germany’s export orientated economy. Looking to the UK, the blue-chip FTSE 100 index rose marginally by 0.2% in local currency terms, with the negative global economic sentiment dragging on performance. The Bank of England’s Monetary Policy Committee (MPC) voted to keep interest rates at 4.5%, reiterating that a “gradual and careful” approach to policy easing is appropriate, while acknowledging the two-sided risks around the monetary policy path.

Japan
Japanese equity markets rose modestly across the week as consumer price data came out above expectations and chipmakers were boosted by Micron’s sale forecasts, with a rally in the US Dollar marginally diminishing returns in US Dollar terms. The Nikkei 225 Index gained 1.7% in local currency terms (1.2% in US Dollar terms), while the broader TOPIX closed 3.25% higher (2.71% in US Dollar terms). The Bank of Japan (BOJ) held its policy rate at 0.5%, as BOJ Governor Ueda noted that the recent shunto spring wage agreement to raise the base pay by 3.8% was higher than expectations. However, with Core CPI rose to 2.6% YoY in February, a marginal increase from 2.5% in the prior month, there are expectations that the BOJ will continue its plan to withdraw stimulus.