2026 Weekly Update

Market update

The S&P 500 closed the week at 6,816.89, +7.46% higher. The Dow Jones closed at 47,916.57, +3.40%, with the Nasdaq higher by +4.86%. The volatility index VIX closed the week at 19.23, down from 23.87. The Euro Stoxx 600 rose +4.11%. 

The 10-year UST closed at 4.32%, down from 4.34% a week before. The yield curve is upward sloping with the yield spread between the 3-month and 10-year UST at 63bps. US Corporate Bond spreads: Investment Grade spreads narrowed -4 bps at 84bps, and High Yield spreads narrowed -25bps at 332bps. German 10-year Bunds yield closed at +3.06% up from +2.99% a week before. In Europe, Corporate Investment Grade spreads narrowed -9bps at 94bps and High Yield narrowed -18bps at 337bps.

The US Dollar Index (DXY) depreciated -1.38% last week and closed at 98.65. The Euro closed at 1.1723 (+1.77%); the Yen appreciated +0.25%, closing at 159.27 and the Swiss Franc appreciated +1.45%, closing at 0.7887. Gold closed at $4749.75, appreciating +1.56%. Oil was lower, Brent closed at $95.2 (-12.68%) and WTI at $96.57 (-13.42%).

Macroeconomy

US inflation

The economic impact of the ongoing Middle East conflict is becoming increasingly evident in US data. Headline CPI rose by 0.87% in March, the largest monthly increase since June 2022, driven by a 21.2% surge in gasoline prices, the biggest monthly jump since records began. This pushed year-on-year CPI up to 3.3%, its highest level since May 2024, while core CPI (excluding food and energy) posted a more moderate 0.20% monthly gain and 2.6% year-on-year. Meanwhile, the core PCE index rose 3.0% year-on-year in February, slightly lower than January’s 3.1%. Personal income fell by 0.1% in February, reversing a 0.4% increase in January. The University of Michigan consumer sentiment index hit a record low of 47.6 in early April on fears over rising energy prices. The Bureau of Economic Analysis also revised down its estimate of Q4 2025 real GDP growth to 0.5% annualized, from a previous 0.7%, reflecting weaker investment.

Europe and Asia

In Europe, services activity continued to contract in March, with the S&P Global France Services PMI falling to 48.8 and Italy’s services sector unexpectedly entering contractionary territory because of soft demand and heightened uncertainty linked to the Middle East conflict. In China, factory gate prices (PPI) rose 0.5% year-on-year in March, the first increase in over three years, mainly due to higher commodity and energy prices, signaling that global cost pressures are beginning to feed into the Chinese economy. Similarly in Japan, inflation-adjusted real wages rose 1.9% year-on-year in February, marking the fastest pace of growth since 2021 and exceeding market expectations of 1.3%. Regional confidence surveys and the March Tankan survey point to a deteriorating outlook in the coming months.

Double Blockade

Over the weekend, direct talks between the US and Iran in Pakistan ended without a deal, as the sides failed to come to terms on key issues. US Vice President JD Vance stated that Iran had not accepted US terms, though both sides left the door open for further diplomacy. Despite these diplomatic efforts, tensions escalated as President Trump announced that the US Navy would begin blockading ships entering or leaving the Strait of Hormuz, starting at 10am Eastern time on Monday. The blockade targets vessels associated with Iranian ports, while US Central Command clarified that ships heading to non-Iranian destinations would not be impeded. Trump also ordered the Navy to interdict any vessel that has paid a toll to Iran. The economic implications were immediate, with Brent crude surging back above $100 as markets reacted to the heightened risk of supply disruptions. 

Highlights

On rates

The past week was marked by renewed volatility across global fixed income markets.  Government bonds initially rallied on news that the US and Iran agreed to a two-week ceasefire but later lost some ground following indications that the deal wasn’t holding quite as expected. In the US, Treasury yields ended the week lower, with the 2-year yield closing at 3.80%, down -4.4bps while the 10-year fell -2.4bps to 4.32%. The move lower came as investors became more confident that the Federal Reserve might still be able to cut rates this year. In fact, the market-implied probability of a cut by December rose to 26%, up from 19% the previous week. Rate expectations moved in a similar direction in Europe, with the probability of an April rate hike from the ECB falling to 34% from 50% last week. That meant 2yr Bunds yield were -1.4bps lower and ended the week at 2.60%, although the 10yr bund yield closed +6.5bps higher at 3.06%.

On earnings

The Q1 earnings season is just getting underway, with the main wave of reports set to begin this week. Early results have already seen some notable beats: Delta Air Lines reported strong revenue growth and robust demand, while Levi Strauss delivered results ahead of expectations and raised its FY26 guidance, despite ongoing uncertainty. This week, attention turns to US financials, with Goldman Sachs reporting on Monday, followed by BlackRock, JPMorgan, and Citigroup on Tuesday, and Bank of America and Morgan Stanley on Wednesday. Netflix is also due to report on Thursday. In Europe, luxury groups such as Hermès, Kering, and LVMH will be in focus, alongside key tech names like ASML and TSMC. As the season progresses, the market remains attentive to the potential impact of recent geopolitical developments on US corporate profits and global growth.

What to watch

• Monday: US Small Business Optimism; South Korea Exports for early April.
• Tuesday: US ADP Employment and PPI; Singapore Q1 GDP; China March Exports.
• Wednesday: US Empire Manufacturing and Fed's Beige Book.
• Thursday: US Initial Jobless Claims; UK Monthly GDP; Eurozone Final CPI for March; China Q1 GDP and March Data.
• Friday: Singapore March Exports.