2026 Weekly Update

Market update

The S&P 500 closed the week at 6,611.83, +4.23% higher. The Dow Jones closed at 46,669.88, +3.22%, with the Nasdaq higher by +5.78%. The volatility index VIX closed the week at 24.17, down from 30.61. The Euro Stoxx 600 rose +2.72%.

The 10-year UST closed at 4.33%, down from 4.35% a week before. The yield curve is upward sloping with the yield spread between the 3-month and 10-year UST at 62bps. US Corporate Bond spreads: Investment Grade spreads narrowed -2bps at 88bps and High Yield spreads narrowed -6bps at 357bps. German 10-year Bunds yield closed at +2.99% down from +3.09% a week before. In Europe, Corporate Investment Grade spreads remained flat at 103bps and High Yield widened +3bps at 355bps.

The US Dollar Index (DXY) depreciated -0.53% last week and closed at 99.98. The Euro closed at 1.1545 (+0.74%); the Yen depreciated -0.14%, closing at 159.68 and the Swiss Franc appreciated +0.26%, closing at 0.798. Gold closed at $4,660.53, appreciating +2.65%. Oil was mixed, Brent closed at $109.77 (-2.67%) and WTI at $112.41 (+9.26%).

Macroeconomy

US jobs

The US economy added 178K jobs in March according to the Establishment Survey, far exceeding expectations (consensus was modeling around +60k). Job gains occurred in health care, construction, transportation and warehousing. Federal government employment continued to decline and is down 355k, or 11.8%, since reaching a peak in Oct 2024. Establishment Survey revisions were low in aggregate for January and February combined (down 7k for the two months in aggregate). The Household Survey painted a bleaker portrait of the labor landscape, showing a 64k drop in the number of employed people and a 396k fall in the size of the civilian labor force while the participation rate ticked down 10bps to 61.9%. The unemployment rate fell 10bps m-o-m to 4.3%. Average hourly earnings rose 3.5% y-o-y to $37.38 while average weekly compensation also climbed 3.5%. The workweek length ticked down modestly on a m-o-m basis to 34.2 hours.

US data

The services ISM for March came in below expectations, with the headline index falling 2.1 points m-o-m to 54 (vs. consensus at 54.9) while many of the key sub-indices painted a downbeat portrait of growth (business activity/production -6 points m-o-m, employment -6.6 points, backlog of orders -2.3 points, and new export orders -6.5 points) along with rising inflation readings (the prices index surged 7.7 points to 70.7, the highest reading since Oct 2022). New Orders was the one growth bright spot, with the index climbing 2 points to 60.6. Thirteen industries reported growth in March, one fewer than in February, and the number reporting contraction remained at three. The March ISM manufacturing came in at 52.7 vs 52.3 expected, with the prices paid component rising to 78.3 (vs. 74.0 expected), its highest reading since mid-2022. On the consumer side, the Conference Board consumer confidence unexpectedly improved in March to 91.8 (versus 91.0 previous, 87.9 expected). So, US consumer sentiment is proving relatively resilient in the face of the Iran shock, even if the expectations series did deteriorate from 72.6 to 70.9 (vs. 68.4 expected). Regarding employment, the US ADP private employment figures for March (+62K vs. +40K) were strong. However, February JOLTS employment survey was on the softer side, with job openings largely in line with expectations but the quits rate edging down from 2.0% to 1.9% and layoffs rising to a 4-month high of 1,721k (vs. 1,668k expected).

Fedspeak

Fed Chair Powell, whose comments were interpreted dovishly, saying that inflation expectations were “well anchored beyond the short term”. So that eased fears that the Fed would rush to hike, and he also said that “policy is in a good place for us to wait and see”. Later on, we also heard similar comments from New York Fed President Williams who said, “policy is well positioned” and that long-term inflation expectations were consistent with the Fed’s 2% goal.

Asia data

In China, the RatingDog manufacturing PMI came in at 50.8 in March, down from 52.1 in February and below the expected 51.6. Rising oil prices contributed to increased cost pressures, dragging from the strong momentum in February. Official PMIs showed the manufacturing PMI at a one-year high of 50.4 (vs. 50.1 expected), whilst the non-manufacturing PMI rose to 50.1 (vs. 49.9 expected). In Japan, the BoJ’s Tankan survey improved for a fourth consecutive quarter, with sentiment among large manufacturers rising to +17 from +16 in December. Companies are also signaling a larger-than-expected increase in capital expenditures though they are more cautious about the future. Lastly, South Korea’s consumer inflation picked up from +2.0% to +2.2% in March, though this is below consensus expectations of +2.3%.

Highlights

Strait of Hormuz

On Saturday, Iran cleared the way for Iraq to begin using the Strait of Hormuz (before the war, Iraq was sending ~3.3-3.5M BPD of oil through), expanding the list of countries with permission from Tehran to use the waterway (that list now includes China, Russia, India, Pakistan, and more), and overall traffic through Hormuz is at the highest levels since the war commenced (although it remains only about 20% of pre-war levels). While US intelligence doesn’t think Tehran will reopen Hormuz completely anytime soon (according to Reuters), granting permission to individual countries will help ease traffic flows. OPEC+ on Sunday agreed to increase May production by 206k barrels-per-day, although this was largely a symbolic move given the ongoing disruptions to production and shipping in the Middle East (OPEC+ warned it would take a long time to fully restore output once fighting ends).

On rates

Over the past week, US Treasury yields experienced a lot of volatility, culminating in a sharp rise during Friday’s session as markets received a much stronger-than-expected March employment report. The 2-year yield climbed by 4.4bps and the 10-year by 3.9bps, reversing earlier declines and reflecting renewed optimism about the labor market. Both headline (+178k vs. +65k expected) and private (+186k vs. +78k expected) payrolls exceeded consensus, while the unemployment rate dropped to 4.29%, well below expectations. This robust data contrasted with earlier signs of labor market cooling, such as softer February payrolls, affected by strikes and weather, and a recent decline in job openings. On average, job growth in the first quarter has been well above expectations, easing concerns about the Fed’s employment mandate. Credit markets also responded with US high yield spreads tightening to their lowest levels since early March, even as private credit names underperformed (Apollo -0.87% and Blackstone -0.72%). In Europe, rate moves were less pronounced, but investors remain focused on central bank signals amid persistent geopolitical and energy market volatility. In Asia, speculation is mounting that the Bank of Japan could raise rates at its April meeting, as rising oil prices stoke inflation concerns and the 10-year JGB yield went up to 2.42%. Looking ahead, global rates will remain sensitive to the busy calendar of economic data, including US inflation expectations, durable goods orders, and consumer sentiment, as well as important releases from Europe and China.

On earnings

As of early April, the market is entering the Q1 earnings season, with the main wave of reports expected to begin next week. The initial batch of results is already underway, with several companies set to report this week. So far, early releases have highlighted key themes such as the impact of high oil prices, inflationary pressures on consumer demand, and continued investment in artificial intelligence. Samsung Electronics delivered a standout preliminary Q1 report, with sales up 68% year-on-year, well ahead of expectations, probably driven by a strong memory segment performance. As the season progresses, financials will lead the way, with Delta’s Q1 results and Levi Strauss among the first major names to report this week. Geopolitical developments remain in focus, as investors assess their potential impact on US corporate profits and global growth.

Quarterly review

Q1 was a poor quarter for asset returns, as the Iran conflict dominated the agenda. To be fair, things did start off quite strongly in January and February, as positive data supported risk assets. So, the S&P 500 closed at a record on Jan 27, and Europe’s STOXX 600 also hit a record on Feb 27. But after the strikes began on Feb 28, there was a huge surge in oil prices, leading to the biggest quarterly jump for Brent crude (+94%) since Q3 1990 when the Gulf War began. In turn, that triggered a major cross-asset selloff, and March alone saw the S&P 500 post its biggest monthly decline in a year, whilst 10yr Treasury yields had their biggest monthly jump since December 2024. So nearly all the major assets struggled, and there were plenty of other stories in the headlines too. For instance, the software component of the S&P 500 saw its biggest quarterly decline since the height of the GFC in Q4 2008, whilst gold had its biggest monthly decline in March since October 2008.

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