Market overview
Another week, another set of record highs for US stock markets. How to reconcile buoyant equities with the ongoing conflict in the Middle East? Well for starters the decision by US President Trump to extend the ceasefire with Iran without imposing a new deadline helped. The ongoing break in hostilities, along with the on-off peace talks and news cycle, gives the sense that the conflict is in a somewhat frozen state. Bad news for the energy-importing regions of Europe and Asia, as the Strait of Hormuz, a vital channel through which 20% of global oil and gas passed pre-conflict, remains closed. Not so bad news for the energy-independent US. Little wonder then that US markets are currently outperforming the rest of the pack.
Standard fayre
And with the conflict frozen, markets’ focus has moved back to digesting the standard fayre of economic data, earnings releases and the artificial intelligence (AI) trade. All three have offered encouragement to those of a bullish disposition. Take economic data. US retail sales grew 1.7% in March (or 0.6% if the 15.5% jump in sales at petrol stations was stripped out), while the January and February numbers were also revised higher. Then there was a 52.0 reading in a flash Purchasing Managers’ Index (PMI), a three-month high that points to business activity rebounding in April. Both paint a picture of a resilient US economy.
On the corporate earnings front, 84% of companies in the main US index that have reported so far have beaten consensus expectations, according to FactSet. Furthermore, a blended earnings growth rate of 15.1% year-on-year puts the market on track to register a sixth successive quarter of double-digit growth.
Big Tech’s Big Wednesday
Earnings reports continue to come in thick and fast. Big Tech is due to report this week with numbers from Meta, Alphabet, Microsoft and Amazon all due on Wednesday 29 April. And yet this has not stopped all four AI-hyperscalers from clocking up double-digit gains in April alone. Among the four, Amazon is the standout with a 25% rise, but even this pales in comparison to chipmaker Intel’s 85% surge. Will it be a case of better to travel than arrive? All eyes on Big Wednesday.
Big week for central banks too
Wednesday will also see the Federal Reserve (Fed) reveal its latest interest-rate decision. The market is expecting rates to be kept within the 3.5%-3.75% range after recent comments from officials reinforced the view that the central bank is adopting a wait-and-see approach with regards to the length and depth of any inflationary shock from the Middle East conflict.
Other central banks due to meet this week include the Bank of England, Bank of Japan and the European Central Bank. As with the Fed, all three are expected to keep rates on hold. What the central banks have to say about the current state of play and future interest-rate decisions may be more newsworthy, however. On paper then not such a big week for central banks, but you never know.
Weekly market moves and economic news:
The MSCI All Country World Index (MSCI ACWI) ended the week 0.2% lower, trimming the year-to-date (YTD) gain to 6.3% YTD.
United States:
US equities outperformed. The main stock market closed up +0.6%, making it four weeks in a row of gains. Wall Street still has not caught up with the global index on a YTD basis but with the US market now up 5.0% for the year, the gap is narrowing. Large-cap growth stocks led the way (+0.6%), followed by small caps (+0.4%) and value (+0.2%). YTD, small caps remain the clear winners (+12.7%); value is not far off (+8.7%); while growth very much remains the laggard (+1.4%).
US Treasuries moved lower on the week, partly due to stronger economic data. The yield on the 10-year note ticked up five basis points to 4.30% (up 13 basis points YTD) while the 2-year Treasury yield added seven basis points to 3.71% (up 31 basis points YTD). Uncertainty over the future direction of interest rates is likely weighing here.
United Kingdom:
Despite a 2.6% loss for the week, UK large caps remain comfortably in positive territory YTD (+5.8%). Mid-caps fell by a similar amount (-2.5%) but they too remain up for 2026 (+1.6% YTD). Domestic politics go some way to explaining London’s relative underperformance against the global index. Questions over Peter Mandelson’s appointment as US Ambassador, specifically of the who knew what and when variety, continue to threaten to overwhelm Sir Keir Starmer’s premiership. The worry is should the Starmer government fall it could be replaced by one that is less market friendly. Cue a 15-basis point rise in the 10-year UK gilt yield to 4.91% (up 43 basis points YTD).
Sentiment in the gilt market wouldn’t have been helped by economic data that fed the narrative of future rate rises, and markets are pricing in two 25 basis-point hikes in 2026. There was a month-on-month (M/M) increase in inflation to 3.3% in March, which, while in line with consensus forecasts, was up from 3% in February due primarily to higher petrol prices. UK retail sales also came in on the strong side. The 0.7% M/M rise seen in March was comfortably ahead of the 0.3% expected. Then there was a drop in the unemployment rate to 4.9% for the three months to February compared to market expectations of 5.2%, although this was down to fewer people looking for work. Increased chances of higher rates help explain why sterling finished the week unchanged at US$1.35.
Europe ex UK:
Like the UK, European stock markets underperformed the US—the MSCI Europe ex-UK Index finished 2.3% lower (+3.3% YTD). At the national level, France fared the worst with a 2.9% weekly loss (+0.5% YTD); Germany was marginally better but still ended down 2.3% (-1.5% YTD); similarly, Italy fell 1.9% (+7.1% YTD); while Swiss stocks shed 1.1% (+1.9% YTD). The euro was slightly lower at US$1.17 compared to US$1.18 previously.
A rather sedate week in the European government bond market with the 10-year German Bund yield up just three basis points to 2.99% (up 14 basis points YTD). A nod perhaps to data suggesting sentiment is weakening in the region. The April German Information and Research (Ifo) Business Climate Index came in below expectations and at 84.4 was the lowest since May 2020. In France, consumer confidence fell more than expected to 84 in April, down from 89 in March.
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