North America
Last week, U.S. markets were volatile and largely driven by geopolitical developments rather than economic data. Stocks initially rose on hopes of easing tensions in the Middle East but declined later as uncertainty resurfaced, rising oil prices added pressure, and large technology stocks continued to weaken. While mid- and small-cap indices managed to end higher and break their losing streaks, major indices like the S&P 500, Nasdaq, and Dow fell for the fifth straight week, with value stocks outperforming growth. On the economic front, business activity slowed slightly, particularly in services, while inflation pressures increased due to higher energy costs and supply disruptions, prompting some companies to reduce hiring. The job market remained broadly stable, but consumer confidence declined and inflation expectations rose, reflecting growing caution among households. Investors also remained focused on potential corporate mergers and acquisitions, which contributed to active trading in equity and credit markets. Meanwhile, bond markets were choppy, with investors increasingly factoring in the possibility that the Federal Reserve may keep interest rates higher for longer amid persistent inflation risks, adding to uncertainty in both equity and fixed-income markets.

Europe & UK
Last week, European markets showed mixed performance amid ongoing uncertainty over the conflict in the Middle East and its potential impact on economic growth. The pan-European STOXX Europe 600 Index rose 0.35% in local currency terms, while major national indices were mixed: Italy’s FTSE MIB gained 1.26%, France’s CAC 40 rose 0.47%, the UK’s FTSE 100 climbed 0.49%, and Germany’s DAX fell 0.29%. The European Central Bank signalled that it is ready to raise rates if necessary, though ECB President Christine Lagarde emphasized that it is too early to make decisions and warned that markets may be overly optimistic about the conflict’s economic effects. Economic data highlighted mixed trends, with Germany’s Ifo Business Climate Index falling to its lowest level since February 2025, signalling weaker business confidence, while German manufacturing activity improved modestly. Eurozone business growth softened as the S&P Global Composite PMI edged down to 50.5, reflecting contracting new orders and supply chain disruptions. The OECD also revised down its European growth forecasts for 2026, citing higher costs and weaker demand due to the conflict, now projecting eurozone growth of 0.8% and UK growth of 0.7%. Meanwhile, UK inflation held steady at 3% in February, though this measure does not yet reflect the impact of rising energy prices following the outbreak of the conflict.

Japan
Last week, Japan’s stock market showed mixed performance, with the Nikkei 225 remaining flat while the broader TOPIX Index rose 1.1%, as investor sentiment was weighed down by elevated oil prices and the ongoing conflict in the Middle East. Concerns about higher energy costs, slower economic growth, and potential pressure on household spending were heightened, prompting Prime Minister Sanae Takaichi to announce plans for a comprehensive review of oil supply and related measures, including releasing state-held reserves. The yen hovered around JPY 160 against the U.S. dollar, near levels that previously triggered intervention, and Finance Minister Satsuki Katayama warned that authorities would respond firmly to speculative moves, keeping currency volatility in focus. In fixed income, the 10-year Japanese government bond yield rose to 2.34%, reflecting higher global yields, inflation expectations, and prospects of gradual monetary policy normalization by the Bank of Japan, which left rates unchanged in March but kept the possibility of a rate hike in April open. On the economic front, Japan’s nationwide core consumer price index eased to 1.6% year over year in February, aided by government energy relief measures, though policymakers noted that inflation pressures are likely to persist due to high oil prices, and emphasized that sustained wage growth remains crucial to supporting stable inflation.