In our latest Weekly Comment, Head of Fixed Interest Research Richard Carter, CFA provides his insights into the most recent market developments, including the market impact of the new US-Iran ceasefire, the rebound in global equities, and shifting expectations for inflation and interest rates.
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Market overview
A shortened week, courtesy of the Easter break, along with US President Trump indicating an end to the Middle East conflict could come sooner rather than later (at least that was at the beginning of the week), saw global stock markets snap a month-long losing streak.
A week of course is a long time in financial markets, particularly in times of conflict. Over the Easter weekend, the US President ratcheted up the rhetoric (and the use of expletives), threatening to send Iran back to the “Stone Age” by targeting key infrastructure including bridges and power plants. Iran said it would retaliate in kind across the region if its infrastructure assets were targeted. With all the threats and counter-threats being made, oil prices remained at the higher end of the range that has been seen to date during the conflict.
And yet behind the scenes, talks between the US and Iran continued and they have since proved to be fruitful too. On Tuesday 7 April, it was announced a two-week ceasefire brokered by Pakistan has been agreed. Under the terms of the temporary truce the US will cease attacks on Iran in return for the reopening of the Strait of Hormuz. The agreement came just hours before the expiry of the latest deadline imposed by Trump in which he called for Iran to reopen the Strait or face being “wiped out”.
In the run-up to the ceasefire, the increasingly frustrated and belligerent tone of Trump’s social media posts, his growing use of expletives and his constant mocking of NATO allies who declined to join in the conflict were all suggestive of a US president searching for an off-ramp. Understandable when set against the context of declining approval ratings, a growing cost-of-living crisis at home and fast-approaching mid-term elections in November.
With this in mind, this week’s US inflation dataset is one to watch with the headline consumer price index (CPI) print expected to jump from 2.4% to 3.4% in annual terms. After taking a backseat for much of the past month, economic releases will warrant closer attention from the market, as they increasingly reflect the level of damage the war has inflicted on the US and global economies. In the meantime, the world will be hoping that the two sides use the ceasefire to come to a permanent agreement that will, over time, allow oil and gas production across the region to return to normal. Otherwise, be prepared for potentially more expletives from the US president.
Weekly market moves and economic news:
The MSCI All Country World Index (MSCI ACWI) ended the week up 3.0% so that year-to-date (YTD), the index is now down a more modest 1.6%.
United States:
TA +3.4% weekly gain by the main US stock market (-3.5% YTD) masks a volatile week for stocks as investors grappled with the mixed conflict-related messages coming out of the White House. Growth stocks (+4.2%) led the way, followed by small caps (+3.3%), and value (+2.6%). YTD, value (+2.9%) remains the clear winner compared to growth (-9.0%).
Economic data releases for the week were largely positive. At 178k the number of US jobs created in March came well above expectations of 65k, while the unemployment rate ticked down to 4.3% from 4.4% in February. Consumer confidence also showed signs of improvement with the Conference Board’s Consumer Confidence Index up 0.8 points to 91.8. So too, manufacturing activity which expanded for the third month in a row in March—the Institute for Supply Management Manufacturing Purchasing Managers’ Index (ISM Manufacturing PMI) rose 0.3 points to 52.7 compared to expectations of a fall.
The generally stronger-than-expected data was not enough to stop yields on US Treasuries from finishing the week lower. The 10-year Treasury yield fell eight basis points to 4.35% (up 18 basis points YTD); the 2-year Treasury yield ended down five basis points at 3.84% (up 37 basis points YTD).
United Kingdom:
UK large caps outperformed global equities—a 4.6% weekly gain means London’s main stock market is up a healthy looking 6.1% YTD. Mid-caps were up too, rising 3.3%, although YTD this segment of the market is nursing a 3.0% loss. UK government bonds also had a better week with the yield on the 10-year UK gilt ending 14 basis points lower at 4.83% (up 35 basis points YTD). The move was attributed to the reining in of expectations for the number of interest rates hikes this year to two, from four previously. This could well have contributed to sterling weakening slightly against the US dollar to US$1.32 from US$1.33 previously.
Europe ex UK:
European stock markets joined in the rally with the MSCI Europe ex-UK Index rising 3.7% (-0.2% YTD). At the national level, Italy led the way finishing the week up 5.2% (+1.9% YTD). Germany’s main stocks were not far behind with a 3.9% gain (-5.4% YTD), while French stocks were up 3.5% (-2.2% YTD), and Switzerland’s 3.3% higher (-0.9% YTD).
European government bonds rallied too, supported by a smaller-than-expected uptick in the annual rate of eurozone inflation to 2.5% in March. The February reading was 1.9%. Rising energy costs contributed to what was the highest inflation print since January 2025. The 10-year German Bund yield finished the week 10 basis points lower at 2.99% (up 14 basis points YTD). Finally, the euro was unchanged against the US dollar at US$1.15.
