2026 Weekly Update

Market update

The S&P 500 closed the week at 6,368.85, -2.12% lower. The Dow Jones closed at 45,166.64, -0.90%, with the Nasdaq lower by -3.23%. The volatility index VIX closed the week at 31.05, up from 26.78. The Euro Stoxx 600 rose +0.35%.

The 10-year UST closed at 4.43%, up from 4.38% a week before. The yield curve is upward sloping with the yield spread between the 3-month and 10-year UST at 73 bps. US Corporate Bond spreads: Investment Grade spreads narrowed -2bps at 90bps and High Yield spreads narrowed -6bps at 363bps. German 10-year Bunds yield closed at +3.09% up from +3.04% a week before. In Europe, Corporate Investment Grade spreads widened +1bp at 103bps and High Yield remained at 352bps.

The US Dollar Index (DXY) appreciated +0.51% last week and closed at 100.15. The Euro closed at 1.1509 (-0.54%); the Yen depreciated -0.68%, closing at 160.31 and the Swiss Franc depreciated -1.40%, closing at 0.799. Gold closed at $4,494.09, appreciating +0.04%. Oil was higher, Brent closed at $112.57 (+0.34%) and WTI at $99.64 (+1.34%).

Macroeconomy

Global PMIs

March global PMIs showed firmer manufacturing but softer business activity, slowing new orders, and surging input costs as the Iran conflict impacts supply chains. US flash Composite PMI fell to an 11-month low at 51.4, missing forecasts (51.9) amid higher prices and slowing orders. UK flash Composite PMI dropped 2.7 points to 51.0, a 6-month low, with sharp increases in input and output prices, a rapid fall in employment and a margin squeeze. Manufacturing input costs jumped 14 points to 72, the largest monthly rise since 1992. Eurozone Composite PMI slipped 1.4 points to 50.5 (vs. 51.0 expected), with stable factory activity but weaker services. Input costs accelerated at the fastest pace since last October, signaling mounting price pressures. PMIs pointed to rising inflationary pressures, with the euro area composite input price series seeing its sharpest spike since March 2022, while in the US the composite output price series rose to its highest level since September 2022.

European measures

So far, Spain has approved the most generous package worth EUR 5bn. The measures announced include VAT cut on electricity, gas and fuels from 21% to 10%; cut on special tax on electricity from 5% to 0.5%; removal of special tax on fuels. Measures should remain in place "for as long as necessary". In Italy, a 25 cents per liter cut to exercise duties on fuel for 20 days. Also, government is drafting a decree for EUR 608mn tax breaks to help trucking companies buy diesel. In Portugal, temporary cut to fuel taxes have been approved. The cuts will lead to a saving of 1.8 cents per liter for diesel and 3.3 cents for petrol. In Greece, measures include a direct diesel subsidy of about 20 cents per liter for vehicles in April and May, with a possible extension to May 31, and a digital fuel card giving 3.1 million car and motorcycle owners €25-30 per month during the same period. Farmers will receive a 15% discount on fertilizer purchases. In Austria, a temporary cut to petrol (5 cents per liter) and diesel taxes and limits on fuel retailers' margins have been announced.European data Spain’s March CPI, the first major European print, climbed to its highest level since June 2024. CPI rose 3.3% y-o-y - below the 3.8% consensus but accelerating from February’s 2.5% - driven primarily by higher fuel and lubricant prices. In Germany, the latest Ifo business climate indicator fell to a 13-month low of 86.4 in March (vs. 86.3 expected). UK showed headline CPI remained at +3.0% in February, as expected, but core CPI moved up to +3.2% (vs. +3.1% expected).

Norges Bank

Norway central bank held their deposit rate at 4% as expected however, it affirmed “it will likely be appropriate to raise the policy rate at one of the forthcoming monetary policy meetings”. In terms of expectations, inflation projections have been revised 1ppt higher to 3.4% for 2026, and core CPI 0.6ppt higher to 3.3%. Growth for 2026 is still expected at 1.2% though, with downward revisions for 2027 (-0.2 ppt) and 2028 (-0.6ppt). The updated rate projections now fully embed a 25bp rate hike in the third quarter, and a roughly 50% probability of a further 25bp increase in the fourth quarter. That is a significant shift of direction from December’s Monetary Policy Report, which still signaled one rate cut in 2026. The details of the members' discussions – published for the first time – further reinforce the hawkish message. Alongside the numerous warnings for elevated uncertainty warranting caution, it emerged that “some” members were ready to raise interest rates. The Monetary Policy Committee is made of only five members, suggesting this was a much closer decision than markets had anticipated, with only 6bp priced in. Even more crucially, the committee’s concerns about inflation appear much broader than the energy price shock. Some members highlighted how inflation had remained above target for some time, and the recent stickiness was not due to temporary factors but rather is broad-based. The acceleration in rent inflation is a case in point.

Australia data

Australia’s consumer inflation eased marginally, with the headline CPI rising by +3.7% y-o-y in February, a decrease from +3.8% previously. However, underlying measures remain stubborn, as the Reserve Bank of Australia's (RBA) preferred metric, which excludes significant price fluctuations, has remained steady at 3.3%. The report was a touch softer than expected but the data does not yet account for the surge in energy prices triggered by the conflict in the Middle East. Also, the S&P Global Australia manufacturing PMI fell to 50.1 in March 2026 from 51.0 in February. The services PMI dropped from 52.8 to 46.6, signaling the first contraction in over two years.

Japan data

Japan core CPI inflation decreased to a near four-year low of +1.6% (vs. +1.7% expected and 2% in Feb.), attributed to ongoing government initiatives aimed at alleviating elevated food and utility costs. The headline CPI inflation increased by +1.3% y-o-y, its slowest growth since March 2022. The core-core CPI, which excludes fresh food and energy prices, rose by +2.5% y-o-y in February, a slight deceleration from the +2.6% increase last month. The preliminary Japanese S&P Global flash composite PMI dropped to 52.5 in March from 53.9 in February, indicating the slowest rate of expansion in three months. This deceleration was widespread across various sectors. Services activity decreased to 52.8 from 53.8, while manufacturing exhibited a more significant decline in momentum, with the headline PMI falling to 51.4 from 53.0.

Highlights

On rates

Over the past week, market expectations for interest rates shifted notably as investor focus moved from inflation risks to concerns about slowing growth. Weaker PMI data in both the Euro Area and the US contributed to overnight index swaps for the next ECB meeting in April pricing a 47% probability of a rate hike, the first time in over a week that this has dropped below 50%. In the US, the probability of a Federal Reserve rate hike by December declined to 24%, down from 29% the previous week, as policymakers continued to emphasize a data-dependent approach. US 10-year Treasury yields fell by 4.0bps overnight to 4.39%, while 10-year bund yields rose by 5.1bps to 3.09%, their highest level since 2011. In Asia, rising energy prices and currency volatility kept policy risk elevated. In Japan, 10-year government bond yields rose to 2.34% as the yen stood near JPY 160 against the USD, triggering warnings of intervention from authorities. The Bank of Japan maintained its cautious stance, with markets watching for signs of gradual policy normalization. Elsewhere, several Asian governments (Philippines, South Korea, and India) took targeted measures to contain inflation and stabilize markets, leaving regional rates sensitive to further energy and policy developments.

What to watch

• Monday: US February Chicago Fed national activity index, January construction spending; Japan first survey of shunto results; Eurozone March consumer confidence
• Tuesday: US, UK, Japan, Germany, France, Eurozone flash March PMIs; US March Philadelphia Fed non-manufacturing activity, Richmond Fed manufacturing index, business conditions; Japan February national CPI; EU27 February new car registrations
• Wednesday: US February import price index, export price index, Q4 current account balance; UK February CPI, RPI, PPI, January house price index; Japan February PPI services; Germany March Ifo survey; Australia February CPI
• Thursday: US March Kansas City Fed manufacturing activity, initial jobless claims; Germany April GfK consumer confidence; France March business confidence, consumer confidence; Italy March consumer confidence index, economic sentiment, manufacturing confidence; Eurozone February M3
• Friday: US March Kansas City Fed services activity; UK March GfK consumer confidence, February retail sales; China February industrial profits