The Weekly Note

Global markets advanced over the week, supported by signs of de-escalation in the Middle East, resilient economic data, and a constructive start to the earnings season. Risk sentiment improved as energy supply concerns eased, helping to lift equities across major regions, with the United States leading gains. While inflation pressures showed tentative signs of moderation and growth remained broadly stable, underlying divergences persist – particularly between stronger industrial activity and weaker consumer and housing trends. Central banks maintained a cautious stance amid ongoing uncertainty, and although geopolitical risks have receded in the near term, markets remain sensitive to developments that could disrupt the current constructive backdrop.

United States

US equities extended their rally for a third consecutive week, with major indices reaching fresh record highs. Investor sentiment was buoyed by signs of easing tensions in the Middle East, encouraging early-stage earnings reports, and broadly supportive economic data. Growth stocks, particularly those linked to artificial intelligence themes, continued to outperform value peers.

On the macro front, inflation pressures showed signs of moderating. Producer price data for March came in below expectations, with core measures indicating a notable slowdown. Labour market conditions remained stable, as jobless claims declined modestly, reinforcing the view of a resilient employment backdrop.

Manufacturing activity improved across key regions, with both New York and Philadelphia surveys indicating stronger new orders and shipments, although cost pressures remain elevated. In contrast, the housing sector continues to lag, with weaker home sales and declining builder sentiment reflecting subdued demand.

Fixed income markets benefited from improved risk sentiment and geopolitical developments, with Treasury yields easing towards the end of the week. Credit markets were also firm, as high-yield issuance was met with strong investor demand.

Europe

European equities posted moderate gains, supported by corporate earnings and improving geopolitical sentiment. Core markets, including Germany, France, and Italy, outperformed, while the UK lagged slightly.

Monetary policy remained in focus, with European Central Bank officials signalling no immediate urgency to raise interest rates, emphasising the need for clearer inflation dynamics. Meanwhile, growth expectations have softened, with forecasts trimmed amid concerns over potential energy disruptions linked to Middle East instability.

Economic data was mixed. Industrial production showed a modest rebound, but price pressures—particularly in Germany—highlight ongoing cost challenges tied to energy and commodities. In the UK, economic growth surprised to the upside in February, although forward-looking projections have been revised lower, reflecting a more cautious outlook.

Japan

Japanese equities advanced, with the Nikkei reaching record levels as global risk sentiment improved. Market drivers reverted to pre-conflict themes, including strong earnings, corporate reforms, and technology optimism.

Monetary policy expectations shifted, with reduced conviction around near-term rate hikes following cautious commentary from the Bank of Japan. Policymakers highlighted uncertainty stemming from energy price shocks and their potential impact on both inflation and growth.

However, business sentiment weakened, particularly among manufacturers, as supply chain concerns and energy disruptions weighed on confidence.

China

Chinese markets recorded modest gains, supported by stronger-than-expected first-quarter GDP growth. Economic expansion was driven primarily by exports and industrial output, though underlying momentum remains uneven.

Recent data points to a mixed recovery: industrial activity remains relatively robust, but consumer demand is subdued, and the property sector continues to drag on investment. Trade figures suggest slowing external demand, while credit growth indicates cautious borrowing despite ample liquidity.

Middle East

In the Middle East, a temporary ceasefire between Israel and Lebanon, alongside continued US-Iran engagement, helped ease geopolitical tensions. The reopening of the Strait of Hormuz supported a decline in oil prices and reduced immediate risk premia. While sentiment has improved, the situation remains fragile, and markets continue to monitor developments closely.

Other Markets

Hungarian markets responded positively to a significant political shift, with equities, bonds, and the currency strengthening on expectations of improved relations with the European Union and potential access to funding.

Major Company News:

• UniCredit CEO Andrea Orcel has escalated pressure on Commerzbank with a new strategy that targets €5.1bn net income by 2028, well above current guidance. He argues the German lender is underperforming and risks falling behind in a rapidly evolving banking sector.

• Brad Jacobs’ QXO has agreed a $17bn cash-and-stock deal to acquire TopBuild, expanding its push to consolidate the fragmented building products sector. The acquisition, priced at a 23% premium, is part of Jacobs’ broader strategy to build a $50bn industry leader.

• Western carmakers, including BMW, are intensifying efforts to regain share in China’s EV market by launching new models built with local technology. Despite past “in China for China” strategies, foreign brands have lost ground to domestic rivals, with market share halving since 2020, though executives expect renewed growth.

• Walmart is testing a new fulfilment model that uses back rooms in its stores as staging hubs for third-party marketplace goods. The aim is to enable same-day delivery and strengthen its position against Amazon by speeding up last-mile logistics for sellers on its platform.

• Italian luxury hat maker Borsalino is expanding into mainland China, opening a Shanghai outlet and planning up to four additional stores this year. The 169-year-old brand sees China as a key growth market but is pursuing a cautious, disciplined expansion strategy rather than rapid scaling.

20th April 2026

_____________________________________________________________

Market Data