The week that was …
Economic round-up
IMF warns on UK economy
The UK faces the biggest hit to growth from the Middle East war of all the G7 countries, the International Monetary Fund has said, with the economy facing potential stagflation. The surge in energy prices since the start of the conflict could also propel inflation to twice the Bank of England’s target. UK economic growth is now forecast to be 0.8% – 50 basis points down on the IMF’s January prediction. Read more from the Times here
BofE’s Bailey on rate rises
Bank of England governor Andrew Bailey has acknowledged the energy shock will push up prices, but added the UK’s central bank would not rush to make a decision on interest rate rises. Speaking at the IMF meeting in Washington last week, Bailey said factors beyond energy costs made a decision on rates “very, very difficult”. Read more from the BBC here
UK GDP enjoys pre-conflict rise
The UK economy actually saw its biggest monthly rise in more than two years in February – expanding 0.5% – while the January estimate was also revised higher, to 0.1%. Of course, the figures cover a period before the outbreak of the Iran conflict and, as noted, the IMF has since warned the UK would be the hardest hit of the world’s advanced economies. Read more from the BBC here
Insolvencies jump in March
Administrations across England and Wales rose by 82% year on year in March, according to the Department for Business and Trade. The rise has been largely attributed to the February collapse of Market Financial Solutions and related real estate entities. Read more from the FT here
Tariffs weighing less on US prices
US producer prices rose less than expected in March, with the impact from import tariffs waning. Even so, the reading did not change economists’ expectations that the Federal Reserve would probably not cut interest rates in the near term. Read more from Reuters here
China Q1 growth up to 5%
China’s economy grew by 5% in the first three months of 2026, picking up from 4.5% in the previous quarter, and at the top of its target range. As a result, China is expected to leave benchmark lending rates unchanged for an 11th consecutive month in April. Read more from Reuters here
Markets round-up
Markets end week on a high
Oil prices fell back below $90 (£67) and global stockmarkets rose sharply on the week after Iran’s foreign ministry said the Strait of Hormuz would reopen for commercial traffic for the duration of the ceasefire in Lebanon. By Saturday morning, however, Tehran has said it was closing the waterway again over the continuing blockade of its ports by the US Navy. Read more from the Times here
Risk appetite hits US dollar
The US dropped to multi-week lows on Friday as risk appetite soared after Iran said the Strait of Hormuz would be opened. The dollar index, which measures the greenback against a basket of six currencies, fell 0.3% to 97.96 after earlier dropping to 97.63 – its lowest level in seven weeks. Read more from Reuters here
Investors return to Hungary
Investors piled into Hungarian assets after the defeat of incumbent prime minister Viktor Orban. They are principally betting Hungary will now be able to forge closer ties with the EU to boost the country’s economy and reduce borrowing. Read more from the FT here
Oil-price trades continue unbelievable timing
Investors placed a bet worth $760m on a falling oil price around 20 minutes before Iran’s foreign minister announced the Strait of Hormuz would reopen. Large, well-timed trades in recent months have prompted concern from US lawmakers and legal experts. Read more from Reuters here
Economists flag rise of ‘petroyuan’
Economists are torn on whether the US dollar is becoming a less potent force in the global economy. A note from Deutsche has predicted the rise of the ‘petroyuan’ amid the Iran war but Franklin Templeton has said it sees no alternative to the greenback for the time being. Read more from CNBC here
“Until there is some de-escalation in the Middle East, bond markets are likely to stay under strain as geopolitical risk keeps inflation concerns alive.
Selected equity and bond markets: 10/04/26 to 17/04/26
| Market | 10/04/26 (Close) |
17/04/26 (Close) |
Gain/loss |
|---|---|---|---|
| FTSE All-Share | 5664 | 5720 | +1.0% |
| S&P500 | 6817 | 7126 | +4.5% |
| MSCI World | 4474 | 4650 | +3.9% |
| CNBC Magnificent Seven | 394 | 428 | +8.6% |
| US 10-year treasury (yield) | 4.34% | 4.25% | |
| UK 10-year gilt (yield) | 4.77% | 4.69% |
Investment round-up
Standard Life buys Aegon UK
Standard Life has agreed to buy Dutch rival Aegon’s UK business for £2bn, the companies revealed on Wednesday. The combined group will now reach 16 million customers and boost assets under management to £480bn. Under the terms of the deal, Standard Life will pay £750m in cash.
EM investment pioneer Mobius dies
Mark Mobius, the founder and former fund manager of Templeton Emerging Markets investment trust, has died aged 89. An acknowledged pioneer of emerging market investment, he went on to found Mobius Capital Partners in 2018 after leaving Franklin Templeton.
Impax trust’s pyrrhic victory
Shareholders in Impax Environmental Markets overwhelmingly approved the trust’s proposed exit tender offer with 99.97% of those voting at the general meeting in favour of the proposal. The turnout was relatively low, at just 46.1% of shareholders. AIC chief executive Richard Stone said: “This is likely to result in the loss of a unique investment trust which nearly nine in ten shareholders backed in a continuation vote last year.”
European-domiciled ETFs see assets spike
Assets in European-domiciled active ETFs have risen from €52.5bn (£45.7bn) at the end of 2024 to €85.6bn at the end of March 2026, according to data from Morningstar. Active ETFs saw net inflows of €7.4bn in the first quarter of 2026.
One-third of investors back ethical funds
Almost a third (31%) of UK investors prefer to have ethical or sustainable investments even if it reduces their financial returns. Data from Rathbones suggests younger investors are more inclined to endure lower returns in favour of sustainability, with 56% of those aged 30-44 caring that their investments are sustainable compared to 18% of 65–80-year-olds.
NT poised to re-enter active ETF market?
Northern Trust Asset Management may be preparing to re-enter Europe’s ETF market. According to recent reports, the firm is reassessing its European ETF strategy and weighing whether to convert existing active funds into ETFs as it looks to tap renewed demand for actively managed products.
GIB exits UK active management
GIB UK is to close its UK fund management arm, run by GIB Asset Management CEO Katherine Garrett-Cox. The business will now be repositioned as the group’s distribution hub for institutional investors seeking access to high-growth Saudi and broader MENA equity opportunities.
… and the week that will be
Eyes remain on US earnings
Investors are looking forward to a heavy week of US corporate earnings to support further gains in the US stockmarket, which has shaken off war-related concerns to reach record peaks. Hopes for a cooling of US-Iran tensions have led to a sharp rally, with major indices hitting new highs. Nearly a fifth of S&P 500 companies are slated to report results this week. Read more in ‘In focus’ below and from Reuters here
UK braces for political turmoil
It promises to be a tough week – or two – for Keir Starmer, as he faces further questions over the appointment of Peter Mandelson as US ambassador. The appointment could yet prompt the downfall of the prime minister, who is also facing a tough set of local elections in early May. Gilt yields could wobble if there are signs of a more left-wing leader entering 10 Downing Street. Read more from the FT here
The week in numbers
UK inflation: Consensus forecasts have UK prices up 3.4% year-on-year from 3%, and 0.8% month-on-month from 0.4%, over March. Core CPI inflation is forecast to be 2.8%, down from 3.2%.
UK employment: February data is expected to show the UK unemployment rate rising to 5.3% from 5.2%.
UK business: Consensus expectations have the flash April purchasing managers indices (PMIs) for the UK showing manufacturing activity holding steady at 51, and services rising to 51.4 – from 50.5 the previous month.
UK retail sales: Consensus forecasts for UK retail sales in March are for a 0.2% month-on-month rise, compared with -0.4% the previous month.
US business: Consensus expectations have the flash April PMIs for the US showing manufacturing activity falling to 52 from 52.3 in March, and services activity falling to 49.6 from 49.8.
US retail sales: Consensus forecasts for US retail sales in March are for a 0.4% month-on-month rise.
Eurozone consumer confidence: The flash April reading of consumer confidence in the Eurozone is forecast to fall to -17.9, down from -16.3 the previous month.
German economic sentiment: Consensus forecasts have the ZEW index of economic sentiment falling to -10 in April, from -5 in March.
Germany business: Consensus forecasts for the flash iteration of Germany’s April PMI have manufacturing rising to 52.5 from 52.2 the previous month.
Japan inflation: Consensus expectations are for Japanese prices over March to have risen 1.5% year-on-year from 1.3%, and core inflation to have rise to 2% from 1.6%.
Japan business: Consensus expectations are for the flash iteration of Japan’s April PMI will show manufacturing activity contracting to 50.1 from 51.6.
In focus: BIF? BAM! POW!
Investors are used to equity markets behaving erratically at times of crisis but – ‘mini-budgets’ excepted – fixed income tends to be a more reflective place. Not so much in recent weeks, however, with pricing in some parts of the government bond market proving especially excitable. There is even a new acronym for those hardest-hit – the so-called ‘BIFs’ – as Britain, Italy and France suffer the slings and arrows of global bond market sentiment.
Both the UK and Italy have seen 10-year yields spike 50 basis points (bps) higher, for example, while France has been just behind. All are viewed as more vulnerable to the impact created by the Iran crisis. Short-dated UK bonds have delivered a particularly wild ride, with the two-year gilt moving from a 3.5% yield at the end of February to above 4.6% over the next three weeks. With Bank of England base rates currently at 3.75%, that would imply more than three rate rises by the end of the year.
A range of factors have come together to create these problems in the UK and, according to David Coombs, head of multi-asset investing at Rathbones, hedge funds and macro traders have played a key role in creating volatility. They took highly leveraged bets on rate cuts, he explains, which had to be rapidly unwound in the face of the energy-price shock.
There are also longer-term factors. As foreshadowed above, the UK market has never quite recovered from the Liz Truss debacle while ongoing speculation over the fate of the current occupant of Number 10 has not helped either. Coombs had thus reduced his gilt duration – not because of any foresight on the Iran crisis, but because of the ongoing political instability and the potential for a harder-left government, should Labour be wiped out in the May elections.
For his part, Michael Browne, global investment strategist at the Franklin Templeton Institute, argues the UK has a bigger inflation problem, saying: “The UK seems to get hold of inflation and keep it longer than anyone else.” It took a long time for the 2022 inflation spike to be squeezed out of the system, he adds.
Inflation had already been easing going into the Iran conflict, and interest rates are starting from a much higher level, which should reduce the need for the Bank of England to react as aggressively as it did around the 2022 Ukraine crisis.”
In contrast, the impact for other bond markets has not been quite so extreme – in the US, for example, the 10-year treasury note moved from below 4% at the end of February to its current level of 4.25%. That said, neither has it fulfilled its usual role as a safe-haven asset. Bonds from the World Bank, the European Investment Bank and Germany’s state-owned KfW have all been preferred over US government debt as a home for nervous capital.
So does what opportunity, if any, does this create? “My sense is that all central banks are being very cautious,” says Browne. “They are not going to allow what happened in 2022/23 to happen again. They are likely to be more aggressive this time.”
Browne goes on to suggest, however, that everyone is currently “parked up in the short end” – meaning some opportunities are emerging in longer-dated bonds. “We have seen a couple of round trips to the ‘5.50 to 5.60’ on the 30-year gilt,” he adds. “That looks really interesting.” To his mind, 3.6% on the 30-year German bund is also getting into the ‘buy’ zone.
Even though shorter-dated gilt yields have come down, they are still 50bps to 75bps higher than they were before war broke out. This may overrate the likelihood of interest rate rises, with Bank of England governor Andrew Bailey reiterating last week it would not “rush to judgement” on rate rises.
Notes Richard Carter, head of fixed interest research at Quilter Cheviot: “This episode is somewhat different to what we saw around the 2022 Ukraine crisis. Inflation had already been easing going into the Iran conflict, and interest rates are starting from a much higher level, which should reduce the need for the Bank of England to react as aggressively as it did then.”
He continues: “Despite the volatility, starting yields look compelling – 10-year gilts above 5% and UK corporate bonds near 6% offer meaningful income for long term investors. Until there is some de-escalation in the Middle East, however, bond markets are likely to stay under strain as geopolitical risk keeps inflation concerns alive.”
We continue to focus our exposures on higher-quality credit, while having a reasonable amount of liquidity to buy credit if spreads do widen from here.”
For Coombs, gilt yields are not yet high enough to tempt him – but he still sees plenty of opportunities in the wider government bond markets. As such, he is buying baskets of government bonds, which include US, Norwegian, New Zealand and Australia. Yields of 4.5% to 5% are “not to be sniffed at,” he adds.
It is a different picture for corporate bonds, however – and, if anything, multi-asset managers are even more negative after the crisis. Credit spreads have barely moved in response to the Iran attacks – indeed, they are now back to levels seen in early February – and Coombs argues they look “super unattractive” at these levels.
Here, private credit weakness may also cause problems. “If there are outflows from retail investors in private credit, they could flow into high yield and investment grade,” says Coombs. “That could see the same weakness in spreads. It is not obvious that investors should be buying corporate bonds right now with those spreads. We think you are much better off buying sovereign bonds.”
Elsewhere, Felipe Villarroel, partner at TwentyFour Asset Management, says: “When it comes to spreads, we think that, while corporate fundamentals remain solid, the balance of upside versus. downside remains somewhat skewed, with a rally likely to be relatively small if things go well compared to a larger sell-off if things do not.
“We continue to focus our exposures on higher-quality credit, while having a reasonable amount of liquidity to buy credit if spreads do widen from here. That said, we believe it is unlikely spreads revisit the lows of a couple of months ago given that tail risk has ramped up.”
Investors hoping fixed income would add some ballast to their portfolios during this crisis will have been disappointed. Some normality is returning to fixed income markets today, however – while sufficient dislocation remains to provide opportunities for active managers.
In focus: Earning question
For those looking for some good news in markets, it is possible that US corporate earnings could provide a welcome distraction from the war in Iran over the coming weeks. Reporting is already underway, with many of the major banks seeing their earnings boosted by strong trading revenues after a year of market volatility. The earnings picture could decide whether the recent bounce in stockmarkets is justified.
“The S&P 500 is trading at record highs, suggesting investors may be looking beyond geopolitics and focusing on a more powerful driver of returns: company earnings,” says Daniel Casali, chief investment strategist at Evelyn Partners. “Energy markets have been volatile, but they continue to function. As a result, attention has shifted back to the US earnings season.”
Expectations are high, with analysts forecasting earnings-per-share growth of roughly 18% for both 2026 and 2027, which should support further market gains if achieved, notes Casali. On this, he is optimistic, arguing short-term cyclical momentum and long-term structural trends are reinforcing each other – a combination that can materially lift corporate profitability.
Investment in AI shows no signs of slowing, meanwhile, and AI may also boost profitability. “Automation and data-driven systems are increasingly being used across production, logistics and administration,” Casali says. “By streamlining processes and helping to contain wage costs, these technologies are lifting productivity and profit margins.”
Not that it is just technology that is seeing growth. “Growth has accelerated across small, mid and largecap companies,” points out Lothar Mentel, chief investment officer at Tatton Asset Management. “Bank earnings are an important health check for the US economy, giving us some insight into how consumers are feeling.
“Confident consumers borrow more, which is reflected in better bank profits. These results show US consumers are still spending despite worries about gas prices. JPMorgan’s results put growing consumer spending down to a healthy US labour market and tax refunds, while Citi reported a 5% increase in consumer credit card spending.”
This is all encouraging, as far as it goes – but the relatively muted response to bank earnings may hint at another outcome. Expectations are very high – particularly in the US. Any signs the war is reaccelerating or that earnings are slowing could be treated harshly. Markets still appear to be priced for the best possible case scenario and, while strong earnings could support that, anything else would spell trouble.
