Equities stage bounce back

Equity markets bounced back after the S&P 500 fell into correction territory in the prior week. US economic data including housing and jobs data showed the world’s largest economy is holding up well. However, gains were pared later in the week after concerns about Donald Trump’s trade war re-emerged following comments from the Federal Reserve. Central bank Chair Jerome Powell said that US President Donald Trump’s tariffs were partly to blame for price increases.

In UK equities, the FTSE 100 was +0.4% over the week by mid-session on Friday, with the more UK-focused FTSE 250 flat.

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Geopolitics

Negotiations between the US, Ukraine and Russia over the ending of the war in Eastern Europe are expected to resume in Saudi Arabia on Sunday. They aim to secure from Moscow and Kyiv a 30-day pause in targeting each other’s energy infrastructure while a more comprehensive deal is hammered out.

UK Prime Minister Keir Starmer said Vladimir Putin will face “severe consequences” if he breaches a peace deal with Ukraine. He issued his warning after meeting officials from 31 countries at the Northwood military base outside London, where they have started discussing which western forces might be deployed to protect Ukraine in the future. Mr Starmer said Mr Putin would not be allowed to veto how Kyiv decides to defend itself, after the Russian president demanded Ukraine’s demilitarisation as part of any peace deal. Peace talks and the changing global order.

A US federal judge blocked Elon Musk’s Department of Government Efficiency (Doge) from accessing social security records as part of its hunt under Donald Trump for fraud and waste. She called the move a “fishing expedition”. Judge Ellen Hollander granted a temporary restraining order that prevents Social Security Administration (SSA) workers from allowing Doge to have access to records that contain personally identifiable information.

The chainsaw approach to managing the public sector has become common worldwide. It is likely to have limited success.

The European Union (EU) delayed plans for tit-for-tat moves against Donald Trump's steel and aluminium tariffs until the middle of next month. The trading bloc was set to impose duties on US products from 1 April, after which Mr Trump responded with a 200% alcohol tariff threat. In a move that may bring some calm to the trade dispute, the EU said it would push back its tariffs, saying it wanted "additional time for discussions" with Washington.

Mr Trump invoked emergency powers to expand domestic production of critical minerals, as part of his strategic goal of cutting US reliance on imports from countries such as China. The executive order instructs government agencies, including the defence department, to prioritise mining projects as well as providing technical and financial support to boost critical mineral production. Last year, Beijing banned the sale of some critical minerals to the US, forcing American companies to look for other sources.

Russia and China called for the lifting of sanctions against Iran and reiterated support for Tehran’s claim that its nuclear program is meant for peaceful uses, the three countries said in a joint statement. China’s Deputy Foreign Minister Ma Zhaoxu met with Iranian Deputy Foreign Minister Kazem Gharibabadi and Russian Deputy Foreign Minister Sergei Ryabkov amid tensions over Iran’s uranium enrichment.

Economics

As expected, the US Federal Reserve held its key interest rate steady at 4.25% to 4.50%. Its Federal Open Markets Committee (FOMC) downgraded its outlook for economic growth and gave a bump higher to its inflation projection. Members of the FOMC indicated in their “dot plot” that they continue to expect two further interest rate cuts in 2025. The dot plot is a chart that records each official’s projection for the central bank’s key short-term interest rate and is updated every three months.

The Bank of England also held rates steady at 4.5%. This was widely expected. Governor Andrew Bailey said the central bank still believed rates were "on a gradually declining path". Economists are forecasting two more rate cuts by the end of the year, with many suggesting the next could come in May.

There was some grim news for Chancellor Rachel Reeves ahead of her Spring Statement next week. UK borrowing significantly overshot expectations in February, according to data released by the Office for National Statistics (ONS). The government borrowed £10.7bn in February, up £100m on the same month last year. This was well above the OBR’s forecast of £6.5bn and above economists’ expectations of £7bn. The Chancellor will give an update on her plans for the UK economy and an economic forecast in Parliament on Wednesday 26 March. Is the Spring Statement a Budget?

Consumer confidence in the UK improved slightly in March, but remained "fragile", the results of a closely followed survey showed. Consultancy GfK's consumer confidence index for March rose by one point from the month before to reach -19.0 (consensus: -21.0).

Companies

Pub owner JD Wetherspoon reinstated its interim dividend after a solid increase in first-half sales, but management warned of the impact of rising labour costs on the business. The company cautioned that government increases in employer National Insurance contributions will hit each of its pubs by £1,500 a week.

Shares in investing giant 3i Group slid, despite positive progress ahead of a capital markets seminar focused on its largest portfolio company, the Benelux-focussed general discount retailer Action. The retailer reported strong growth in 2024 and a solid start to 2025, while its broader private equity portfolio continued to perform well, despite macroeconomic and geopolitical uncertainties.

Management at US sportswear giant Nike issued guidance for a steeper drop in fourth-quarter revenue than analysts had expected. Its shares fell, also hitting retailers such as JD Sports. Chief Financial Officer Matthew Friend said he expects fourth-quarter revenue to decline in the “mid-teens” percentage range. That would exceed analyst expectations for a 12.22% decline to $11.07bn, according to a consensus view. The gloomy guidance was issued alongside third-quarter results that beat Wall Street expectations following new shoe launches.

Shares in US semiconductor group Micron Technology jumped after the company reported second-quarter results that beat analysts’ estimates and management issued better-than-expected guidance. Revenue for the third quarter will be about $8.8bn, ahead of the $8.5bn average analyst estimate. This would represent a record quarterly figure, driven by continued strong demand in the datacentre segment.

Asos shares surged after the online fashion retailer lifted its profit outlook for the first half and as Danish billionaire Anders Holch Povlsen increased his stake in the online fashion retailer, sparking renewed speculation of a potential takeover bid. Mr Povlsen, who is Asos’s largest shareholder, upped his stake from 27% to 28%. Should he reach 30%, he would be required to make a formal takeover offer under UK rules.