Stocks tread water globally. The TPP weekend wrap.

Stocks tread water

The Bank of England left interest rates unchanged Thursday as the U.K. economy contends with uncertainty around global trade and looming stagnation at home. The widely anticipated decision keeps the central bank’s benchmark interest rate at 4.5%.

In a statement, the central bank said that its Monetary Policy Committee voted in favour of leaving rates unchanged with an 8-1 majority. One MPC member voted for a 25-basis-point reduction.

“Since the MPC’s previous meeting, global trade policy uncertainty has intensified, and the United States has made a range of tariff announcements, to which some governments have responded,” the statement said.

The decision comes at a time marked by prospective economic headwinds abroad and at home. At a global level, this includes the frequent shifts, lack of clarity and conflict surrounding U.S. President Donald Trump’s trade tariffs, along with their potential impact on U.K. inflation and economic growth.

The U.K. economy has been showing signs of weakening, contracting by 0.1% month-on-month in January. On Thursday, the central bank said that recent business indicators suggested weakness in economic growth and employment intentions. Last month The BOE halved its 2025 growth forecast for the U.K. to 0.75%.

UK government borrowing in February far exceeded expectations, raising concerns over the state of public finances ahead of next week’s Spring Statement. Official figures showed the government borrowed £10.7bn during the month, £100m more than a year earlier and well above both the Office for Budget Responsibility’s £6.5bn forecast and economists’ £7bn consensus.

It marked the fourth-highest February borrowing figure on record.

Cumulatively, borrowing for the financial year to date reached £132.2bn, an increase of £14.7bn from the same period a year ago.

“Ultimately, today’s release will have no influence on how much the Chancellor needs to tighten fiscal policy at next week’s fiscal update,” said Alex Kerr, UK economist at Capital Economics. “Higher gilt yields and the weaker economy have probably wiped out the Chancellor’s headroom of £9.9bn. “And in order to restore that buffer, on top of the £5.0bn of welfare cuts already announced, we think she will cut non-defence departmental spending by around £6.5bn.”

Consumer confidence meanwhile showed a slight improvement in March but remained subdued by historical standards. GfK’s monthly index edged up by one point to -19.0, beating expectations but still well below the long-term average of -10.0. Optimism about the broader economy picked up modestly, while views on personal finances deteriorated.

Europe

The STOXX Europe 600 Index slid -0.6% on Friday but still managed to end the week 0.56% higher, snapping two weeks of losses. Hopes of a boost in government spending fuelled the gains, but tensions about U.S. tariffs planned for early April acted as a curb on the last trading day of the week as the CAC in Paris also fell -0.6%.

Major stock indexes on the week were mixed. Germany’s DAX fell 0.41%, France’s CAC 40 Index finished fairly flat and Italy’s FTSE MIB rose 0.98%.

Speaking at the European Parliament, European Central Bank President Christine Lagarde said the ECB would remain vigilant because of the uncertainties stemming from rising trade tensions. She also said that a proposed U.S. tariff of 25% on European imports would lower eurozone economic growth by 0.3 percentage points in the first year, with the hit to gross domestic product increasing to about half a point if Europe were to respond in a similar manner.

She added that inflation could pick up by about 0.5% due to retaliatory measures and a weaker euro.

The U.S.

U.S. stocks closed the week higher, with most indexes snapping multi-week declines. The Dow Jones Industrial Average performed best, advancing 1.2%, while the S&P MidCap 400 posted its first weekly gain since January. Large-cap tech stocks generally underperformed, weighing on the technology-heavy Nasdaq Composite, which was the worst-performing index during the week. As measured by Russell 1000 indexes, value outperformed growth for the fifth consecutive week.

The highlight of the week’s economic calendar came on Wednesday as the Federal Reserve concluded its March monetary policy meeting. As was widely expected, the central bank held its policy rate steady at 4.25%–4.5%. Fed officials also indicated that they expect 50 basis points (0.5 percentage points) of rate cuts this year, unchanged from a previous projection in December. Notably, however, policymakers increased their expectations for inflation in 2025 while lowering their expectations for gross domestic product growth. The Fed’s post-meeting statement also noted that “uncertainty around the economic outlook has increased.”

Nevertheless, takeaways from the meeting seemed to be largely positive, with Fed Chair Jerome Powell stating that the Fed’s “base case” is that the impact of tariffs will be transitory and that “most measures of longer-term expectations remain consistent with” the central bank’s 2% inflation target. Investors appeared to welcome the generally dovish tone following the meeting, with most stock indexes posting solid gains for the day.

Asia

Japan’s stock markets rose over the week, with the Nikkei 225 Index gaining 1.68% and the broader TOPIX up 3.25%. Foreign investor interest helped lift the shares of Japanese trading companies. The Bank of Japan (BoJ) adopted a cautious stance, holding rates steady as it assesses the potential impact of higher U.S. tariffs on Japan’s economy.

The yen weakened to the low end of the JPY 149 against the U.S. dollar range from about JPY 148.6 at the end of the previous week. The yield on the 10-year Japanese government bond fell to 1.52% from the prior week’s 1.54%.

At its March 18–19 monetary policy meeting, the BoJ kept its short-term policy rate on hold at 0.5%, as expected. The BoJ’s economic and price outlook was broadly unchanged, with the central bank maintaining the view that monetary policy will be tightened if the price outlook develops in line with its forecast. BoJ Governor Kazuo Ueda also noted concerns on trade policies as a risk to the outlook. Investors continued to anticipate that the pace of rate hikes by the BoJ would be gradual.

Mainland Chinese stock markets fell as investors turned cautious after two weeks of gains. The onshore benchmark CSI 300 Index fell 2.29%, and the Shanghai Composite Index shed 1.60% in local currency terms, according to FactSet. In Hong Kong, the benchmark Hang Seng Index declined 1.13%.

China released a batch of better-than-expected indicators showing that the economy started the year on solid footing. Retail sales rose 4.0% in the January-February period from a year earlier, marking the quickest growth rate since November. Industrial output grew 5.9% year on year in the first two months of the year, slowing from December’s 6.2% expansion but still surpassing forecasts. Fixed asset investment—which includes property and infrastructure investment—increased 4.1% in the January-February period year on year, above expectations and December’s 3.2% pace. China’s statistics bureau combines data for January and February to smooth out distortions caused by the irregular timing of the Lunar New Year holiday.

The Week Ahead

Retailers, drinks companies and housebuilders are on the menu for the week ahead, along with the UK government's Spring Statement and a raft of major financial data for the UK, Europe and the U.S.

Ocado and Kingfisher will provide updates on Tuesday, along with mixers maker Fevertree and Irn Bru producer AG Barr.

On Thursday we hear from high street giant Next, where the outlook will be a key focus for many in the retail sector.

On Wednesday Rachel Reeves will deliver the spring statement as the Chancellor of the Exchequer faces mounting pressures on public finances and a potential breach of her own fiscal rules.

Flash PMI will be released for the US, UK, Eurozone, Japan Australia and India on Monday, March 24th, for the earliest insights into economic conditions at the end of the first quarter. Amid fresh US tariff developments in the month, output and price trends will be keenly followed. This is especially so for the manufacturing sector, where questions remain over the sustainability of February's upturn. Additionally, the impact on order books, sentiment and employment will also be closely watched. The flash data follow news that global employment declined in February amidst the fastest fall in developed world staffing levels since July 2020.

Core PCE index, the Fed’s preferred inflation gauge, will be assessed on Friday, following the lower-than-expected February CPI release earlier in the month. That said, more up-to-date March flash PMI prices may play a bigger role in providing guidance on the inflation trend in the US, especially with the market eagerly watching the impact of additional tariffs implemented in March.

Other key data releases include a final reading of Q4 GDP, monthly durable goods orders, home sales and personal income and spending data.

February inflation figures from the UK will be released Wednesday for an official confirmation of what is likely to be still-elevated price pressures. This is based on early indications from February's S&P Global UK PMI data, which showed output prices in the UK climbing at the second-fastest pace in more than one-and-a-half years, ranked just behind January's increase.

Additionally, France and Spain will publish preliminary March inflation figures. Germany's PMI Future Output data, alongside Ifo and GfK surveys, will also be in focus for sentiment changes following recent tariff and debt brake developments.

It should be another exciting week of data for our traders to analyse. Enjoy the rest of your weekend and good luck in the markets next week.

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Disclaimer: The views expressed in this article are the author’s own and should not be considered in rendering any legal, business or financial advice.

Past performance may not be indicative of future results. Therefore, you should not assume that the future performance of any specific investment or investment strategy will be profitable or equal to the corresponding past performance.

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