Global markets are navigating a fragile balance between resilient growth, persistent geopolitical tensions and cautious central banks.

Risk assets remain supported by strong earnings and the technology/artificial intelligence narrative, while bond and currency markets reflect a prudent repricing of interest-rate expectations and a sustained demand for safety through gold.

Macroeconomics

The Middle East conflict distorted economic data last week. Retail sales rose strongly in March as higher petrol prices pushed up nominal sales (+1.7%). Excluding petrol and automobiles, the metric also advanced 0.6% m/m, indicating no slowdown in nominal spending versus February.

On the US business side, the all-industry output Purchasing Manager’s Index (PMI) recovered from near stagnation, rising to 52.0 from 50.3 in March. Confidence in the manufacturing sector led the rebound, climbing to a cycle high of 54.0, but the surge reflected pre-emptive stock-building ahead of anticipated price increases and supply disruptions, rather than genuine demand. Expectations of supply bottlenecks and higher output prices also distorted confidence in services; the latter recovered modestly to 51.3 from 49.8, as new business rose at its slowest pace in two years, with clients citing affordability concerns and geopolitical uncertainty.

Across the Atlantic, UK business activity told a similar story. The composite PMI rebounded in April (52.0 versus 50.3 prior), supported by an acceleration in both services and manufacturing, but a portion of that recovery reflects inventory front-loading. Price pressures compounded the concern: service-sector cost inflation accelerated at the fastest monthly pace since the index’s inception in July 1996, adding to an already uncomfortable headline Consumer Price Index (CPI) reading of 3.3% y/y in March and sticky services inflation of 4.5% y/y.

The eurozone offered a starker contrast, adding to the growth-inflation policy dilemma. Growth slowed across the bloc, as a resilient manufacturing sector (52.2 versus 51.6 prior) was more than offset by a meaningful contraction in services activity (47.4 versus 50.2 prior), while inflationary pressures continued to increase. At country level, Germany’s composite PMI declined, consistent with the deteriorating signal from the Ifo Business Climate Index (84.4 versus 86.3 prior).

Looking ahead, the Federal Reserve (Fed), European Central Bank (ECB), Bank of England (BoE) and Bank of Japan (BoJ) are all widely expected to hold rates this week as they wait for the potential second-order inflationary effects of the conflict in the Middle East. The Federal Open Market Committee (FOMC) meeting will also be the last chaired by Jerome Powell, whose term expires on 15 May. His successor, Kevin Warsh, has promised a ‘regime change’ in monetary policy (i.e. a leaner Fed balance sheet and lower policy rates) and has insisted he will not succumb to political pressure on rates.

Key US releases will include the April Institute for Supply Management (ISM) surveys, the first-quarter gross domestic product (GDP) estimate and the Personal Consumption Expenditures (PCE) price index. In the eurozone, April CPI is projected to accelerate further to around 3.0% year-on-year, while the unemployment rate is expected to hold steady at 6.2%.

Equities

Global equities took a breather last week, delivering a broadly stable performance (MSCI ACWI total return -0.2%). US equities were a bright spot (S&P 500 +0.6%, NASDAQ Composite +1.5%), supported by a continued appetite for the global technology sector, which was the best-performing last week at +3.4%, and helped propel major US benchmarks to new record highs.

Although the ceasefire in the Middle East continues to hold, the ongoing closure of the Strait of Hormuz pushed energy prices higher, with the price of Brent crude rebounding +16.5% from the previous week, thus supporting the global energy sector (+2.8%). Markets continued to look through this lingering headwind as the reporting season got under way, with 28% of S&P 500 constituents having reported Q1 results as of Friday. 84% of companies have beaten estimates so far, with Q1 earnings per share (EPS) growth now estimated at +15.1% versus +13.1% expected at the end of March.

While international equities captured market appetite at the start of the year, US equities have been back in the driver’s seat since the start of the US–Iran conflict (28 February 2026). In addition to an economy less impacted by the Middle East conflict compared with other regions of the world, significant exposure to the relatively insulated technology sector and improving confidence in artificial intelligence monetisation are fuelling a return to US equities. The sector is also contributing to upward earnings revisions overall, with US technology EPS expected to climb +46.3% in 2026.

In the week ahead, 180 S&P 500 companies will publish results, including five of the Magnificent 7, with investors also listening closely to commentary from the Federal Reserve as it holds its next meeting.

Strong tech-led earnings and resilient US growth keep drawing flows into equities, even as the Strait of Hormuz shock lifts oil prices.

Fixed income

Fixed income markets ended Friday with a slightly negative weekly performance, with investment grade, high yield and additional tier 1 (AT1s) all declining by roughly 0.1% to 0.2% over the week as ongoing tensions in the Middle East remain a major geopolitical concern and traffic through the Strait of Hormuz is still impaired.

Meanwhile, the yields on 10-year US Treasuries rose modestly, closing the week at around 4.3%. On the Federal Reserve front, the key development was that US Senator Tillis dropped his hold on the confirmation of Kevin Warsh as the next Fed Chair, following the Department of Justice’s (DOJ) decision to end its criminal probe into current Chair Jerome Powell. Tillis said that the recent DOJ decision removed a threat to the Fed’s independence.

Looking ahead, several major central bank meetings are scheduled this week: the BoJ on Tuesday, the Fed and the Bank of Canada (BoC) on Wednesday, and finally the ECB and the BoE on Thursday. Market expectations are that policy rates will be held steady globally this time, as economists point to elevated uncertainty surrounding the economic outlook and the unclear impact of the Iran-related conflict on inflation via energy prices. However, an increasing number of investors are starting to price in one or several rate hikes in most major geographies for 2026, following changes in inflation expectations.

Credit markets softened as Middle East tensions and a modest rise in core yields weighed on investment grade, high yield and AT1s.

Forex & Commodities

A big week is in store, with most of the major central banks holding policy-relevant meetings. The BoJ will start proceedings on Tuesday and is expected to keep its deposit rate on hold at 0.75%. Markets have priced in an unchanged stance with a high probability; however, underlying wage growth remains strong, and activity surveys have been decent, suggesting that the BoJ is likely to tee up markets for a June rate hike. On balance, this should tilt the meeting towards a hawkish hold, limiting JPY depreciation in the near term.

The FOMC meeting on Wednesday will be Powell’s last as Fed Chair. The Committee is expected to keep rates on hold at 3.50–3.75%, and US data have been broadly constructive, implying that the bar for further rate cuts is quite high. This configuration points to a hawkish hold, with modest upside risks for the USD this week, although markets have reduced USD longs in recent weeks given the lack of strong momentum either way.

The BoE will likely keep rates on hold at 3.75%, with only one or two potential dissenters voting in favour of rate hikes. Markets have priced in 50 bps of hikes over the coming two years, a path that would have a severe impact on growth dynamics and UK fiscal sustainability metrics.

The BoC is also expected to keep rates on hold at 2.25%, a stance already largely priced in by the market. Underlying inflation pressures remain subdued, and weak business activity suggests that the BoC is likely to remain reluctant to raise rates in the near term.

Gold has stabilised at around USD 4,700 per ounce, alongside an ongoing decline in implied volatilities. The market positioning in the futures and exchange-traded fund (ETF) space remains largely unchanged, indicating that investors are waiting for an end to the conflict in the Middle East before re-engaging more decisively in the near term.

A big week is in store, with most of the major central banks holding policy-relevant meetings.

The opinions expressed herein are correct as at 27 April 2026 and are subject to change without notice. This information should not be relied upon by the reader as research or investment advice regarding any particular fund, strategy or security. Past performance is not a guide to current or future results. Any forecast, projection or target, where provided, is indicative only and is not guaranteed in any way.