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U.S. equity markets ended a shortened trading week on a positive note, supported by cautious optimism around easing geopolitical tensions in the Middle East.
Major indices, including the Nasdaq Composite, S&P 500, and Dow Jones Industrial Average, all recorded gains, with the Nasdaq delivering its strongest weekly performance since November.
Market sentiment shifted throughout the week. Early declines were followed by a strong midweek rally after signals from the U.S. administration suggested a potential reduction in military involvement in Iran.
However, uncertainty resurfaced later in the week due to a lack of clarity on de-escalation timelines, briefly pressuring equities before markets stabilised.
In fixed income markets, U.S. Treasury yields declined, reflecting improved investor confidence and easing inflation concerns following comments from Federal Reserve Chair Jerome Powell. Economic data presented a mixed picture. Job creation remained steady, and unemployment claims improved slightly, indicating resilience in the labour market. However, a decline in job openings and slower hiring trends suggested some cooling in labor demand.
Consumer confidence showed modest improvement for the second consecutive month, while manufacturing activity expanded, supported by stronger new orders and production. Despite these positives, persistent cost pressures and continued contraction in manufacturing employment highlight underlying economic challenges.
Europe
European markets also posted strong gains, driven largely by optimism that geopolitical tensions may ease sooner than expected. The STOXX Europe 600 Index rose nearly 4%, with major indices across Germany, France, Italy, and the UK all advancing.
However, rising energy prices are beginning to impact the region’s economic outlook. Inflation in the eurozone increased to 2.5% in March, primarily due to a sharp rise in energy costs. While inflation in other sectors such as services and goods moderated, energy-driven pressures remain a key concern.
Germany’s economic outlook weakened, with growth forecasts revised downward significantly due to the impact of higher energy costs. Meanwhile, manufacturing performance across Europe showed mixed trends. Spain’s manufacturing sector contracted, indicating slowing industrial momentum, while Sweden experienced strong growth supported by increased production and hiring.
In the UK, manufacturing activity remained in expansion territory but showed signs of slowing, with output declining for the first time in six months. Encouragingly, new orders and supply chain conditions improved. Additionally, the housing market showed signs of recovery, with house prices accelerating in March.
Overall, while equity markets responded positively to improving sentiment, underlying economic indicators suggest that energy costs and uneven industrial performance continue to pose risks to the European outlook.
Asia and global developments
In Asia, market performance was more mixed as investors balanced improving domestic data with ongoing global uncertainties. Japanese equities declined during the week, reflecting concerns over rising oil prices and geopolitical risks.
Japan’s economy remains particularly sensitive to energy costs due to its reliance on imported oil. Rising crude prices, combined with uncertainty around Middle East shipping routes, weighed on investor sentiment. At the same time, expectations of a potential interest rate hike by the Bank of Japan grew, driven by inflation concerns linked to higher energy prices.
The Japanese yen strengthened slightly, supported by signals that authorities may intervene to stabilize the currency amid increased market volatility. Economic data showed mixed results, with inflation slightly below expectations and declines in both industrial production and retail sales.
In China, markets showed resilience despite external risks. Manufacturing and services activity improved, indicating a gradual economic recovery supported by both state-driven and private sector growth. However, rising input costs are creating margin pressures, highlighting challenges beneath the surface.
China also introduced policy changes affecting exports in clean energy sectors, which may increase costs and accelerate industry consolidation. Meanwhile, diplomatic efforts from China and Pakistan to de-escalate Middle East tensions underscore the global importance of restoring stability to energy markets and trade routes.
Looking ahead
As global markets continue to navigate geopolitical uncertainty and energy-driven risks, sustained stability will depend on clearer policy direction, easing tensions, and the resilience of underlying economic fundamentals.
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