2026 Weekly Update

Market update

The S&P 500 closed the week at 7126.06, +4.54% higher. The Dow Jones closed at 49447.43, +3.19%, with the Nasdaq higher by +6.84%. The volatility index VIX closed the week at 17.48, down from 19.23. The Euro Stoxx 600 rose +6.09%.

The 10-year UST closed at 4.25%, down from 4.32% a week before. The yield curve is upward sloping with the yield spread between the 3-month and 10-year UST at 56 bps. US Corporate Bond spreads: Investment Grade spreads narrowed -3 bps at 81bps and High Yield spreads narrowed -3 bps at 329bps. German 10-year Bunds yield closed at +2.96% down from +3.06% a week before. In Europe, Corporate Investment Grade spreads narrowed -3 bps at 91bps and High Yield widened +8bps at 329bps.

The US Dollar Index (DXY) depreciated -0.56% last week and closed at 98.1. The Euro closed at 1.1765 (+0.36%); the Yen appreciated +0.40%, closing at 158.64 and the Swiss Franc appreciated +0.89%, closing at 0.7817. Gold closed at $4830.34, appreciating +1.70%. Oil was lower, Brent closed at $90.38 (-5.06%) and WTI at $83.85 (-13.17%).

Macroeconomy

IMF

The IMF (International Monetary Fund) published their latest World Economic Outlook, in which they downgraded their global growth forecasts and upgraded inflation. So global growth is now seen at +3.1% this year, down 0.20% from January. The downgrades were biggest in the areas directly affected by the conflict, with the Middle East and Central Asia slashed by two points to +1.9%. Meanwhile on inflation, they now see global consumer prices up +4.4% this year, 0.60% above the January forecast.

Fedspeak

As the Fed enters its blackout period before the next FOMC meeting on April 29, some Fed officials were heard pushing against imminent rate cuts. Cleveland Fed President Hammack said that her baseline was to keep rates on hold for a while, and even Treasury Secretary Bessent said that he would “understand if the Fed needs to wait on rate cuts” even if he ultimately saw large cuts beyond that. New York Fed President Williams said given everything that was changing, “it doesn’t make sense for us to try to be giving strong forward guidance”. On his side, Governor Miran did again say that the Fed should lower rates, though in favoring “three, maybe four cuts this year”, this was perhaps a slight moderation of his dovishness given he penciled in four cuts in the March SEP. Miran had favored a full 150bps of 2026 easing at the start of the year.

Fed Chair nomination

The nomination hearing for Kevin Warsh as the new Fed Chair is scheduled for Tuesday. To date, the barrier to Warsh’s confirmation has been that Senator Thom Tillis, a retiring Republican senator on the Committee, has said he won’t support any Fed nominees until the Department of Justice probe into Chair Powell is resolved. But the committee chair Tim Scott said that “I believe that the DOJ will finish and wrap this up in the next several weeks”. The other outstanding question is whether Powell would stay on the Board of Governors once his term as Chair concludes, as his Board seat goes up until January 2028. So far, Powell hasn’t confirmed either way, only saying that he will remain on the Board while the investigation is ongoing. But in a scenario where the investigation has concluded, he hasn’t confirmed his intentions.

Tariffs

Treasury Secretary Bessent said that the tariffs which were struck down by the Supreme Court could be restored to previous levels by mid-Summer. In remarks during a Wall Street Journal event, Bessent said “we will be implementing or conducting Section 301 studies, so the tariffs could be back in place at the previous level by beginning of July.” As a reminder, since the IEEPA tariffs were struck down, the administration has implemented a 10% global tariff, but that will expire on July 24 without congressional authorization.

US prices

PPI (Producers Price Index) inflation reading was softer than expected. It showed headline PPI was only up +0.5% in March (vs. +1.1% expected), meaning that the y-o-y measure only rose to +4.0% (vs. +4.6% expected). So that helped to ease fears about a larger wave of inflation, particularly after the previous week CPI. US small business optimism fell to 95.8, matching post-Liberation Day 2025 levels, with capex sliding to its lowest since 2009.

China GDP

Chinese GDP grew +5.0% y-o-y in the first quarter, surpassing forecasts of a +4.8% increase and showing an improvement from +4.5% in the preceding quarter. Additional data on economic activity released presented a mixed yet still resilient outlook, as industrial production increased by +5.7% in March compared to the same month last year, exceeding expectations of a +5.3% rise. However, retail sales advanced by +1.7% in March, falling short of the anticipated +1.9% increase, thereby underscoring ongoing weakness in domestic demand. New home prices continued their downward trend, decreasing by -0.21% in March, following a -0.28% decline in the previous month. So the property slump continues. In other data, China’s March export growth slowed to +2.5% y-o-y (vs. +8.6% forecast, +39.6% in February), likely due to Chinese New Year distortions, but Q1 export momentum remained robust. Imports surged 27.8% y-o-y, exceeding expectations at +13.9%.

Australia data

Australia’s labor market data showed that the unemployment rate remained unchanged at 4.3% in March. Meanwhile, employment experienced a modest increase of 17,900, compared to the anticipated 20,000, for the month. Firms contributed by adding 52,500 full-time positions, indicating a degree of underlying resilience despite a slight slowdown in hiring. This data emerges as the RBA cautions that it may be necessary to further increase interest rates in the upcoming months to mitigate inflation, which is already significantly above the target and poses a risk of rising even higher.

Highlights

On rates

It was another volatile week for sovereign bonds. US treasuries initially rallied on the back of weaker than expected inflation data, with the 10yr yield reaching its lowest level since mid-March. Yields later rose following an increase in oil prices due to the ongoing conflict in Iran. By the end of the week, the 10yr yield was down -7bps, closing at 4.25% helped by easing investor concerns around the prospect of an energy-driven inflationary shock. The market is pricing in 12bps worth of Fed cuts this year and the odds of a 25bp cut by December continued to rise. In Europe, yields saw their largest weekly fall since April 2025 following positive developments in the Middle East conflict. The 10yr bund yields ended the week at 2.96%, down -9.8bps, while the 2yr bunds retreated -19.4bps to 2.41%. This followed big moves on Friday as expectations of an April rate hike from the ECB fell to 9% from 34%.

On earnings

The Q1 2026 earnings season is off to a strong start, with 10% of S&P 500 companies having reported so far. Of these, 88% have delivered EPS above estimates, above the 5-year average of 78%, and the average earnings surprise is 10.8%, also above historical norms. Notably, the financial sector has led the way: HDFC Bank posted FY26 net profit up 11% year-on-year, while US banks such as Citigroup, Bank of America, and Morgan Stanley all reported robust results. Goldman Sachs beat on profit thanks to strong equities trading and investment banking, with a miss in fixed income. Early results from other financials were also healthy. Looking ahead, the next two weeks will be pivotal, with a heavy slate of tech and industrial earnings (Amazon, Alphabet, Meta Platforms, Microsoft, Apple, Caterpillar). In Europe, attention will focus on consumer staples (L'Oréal, Nestlé, Danone) and aerospace/defense (Thales, Safran), as the market shifts its scrutiny toward volume growth and margins following last week's volatile luxury and tech reports.

What to watch

• Monday: UK House Prices
• Tuesday: US ADP Employment and Retail Sales; Kevin Warsh hearing at Senate Banking Committee; UK Employment data; Germany ZEW Survey; South Korea Exports; Taiwan Exports

• Wednesday: US Mortgage Applications; UK CPI; Japan Exports
• Thursday: US Initial Jobless Claims and PMI; UK Public Finance; Eurozone Flash PMI; South Korea Q1 GDP; Asia PMI

• Friday: US University of Michigan Survey; UK Retail Sales: Germany IFO; Japan CPI