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Geopolitics and inflation weigh on market sentiment

US equities slipped on Thursday after touching fresh intraday highs, as renewed tensions around the Iran war and reports of political infighting in Tehran undermined risk appetite and hit software stocks, while chipmakers benefited from strong data centre demand. In Europe, shares ended mostly lower after flash PMI data showed eurozone private‑sector activity falling back into contraction. Across Asia on Friday, markets were trading mixed: Japanese equities outperformed after inflation data confirmed a gradual pickup in prices consistent with the Bank of Japan’s tightening bias, while most other major regional indices were slightly weaker. Bond yields and the US dollar were little changed, and oil prices held near recent highs as investors looked ahead to today’s data releases, including German ifo business climate and US consumer sentiment.

  • Data
  • Autore Shane Strowmatt, Senior Investment Writer
  • Tempo di lettura 5 minuto

Falling market
© Shutterstock

Asia-Pacific equities traded without clear direction on Thursday as investors remained wary despite Israel and Lebanon agreeing at a White House meeting to prolong their ceasefire by three weeks, according to US President Donald Trump. Japanese shares outperformed, with the Nikkei 225 rising around 0.9% after core inflation in Japan picked up to 1.8% in March, from 1.6% in February, matching economists’ expectations and reflecting higher energy costs linked to the Iran conflict. Other major regional benchmarks were mostly weaker. Korea’s Kospi was essentially flat, and Australia’s S&P/ASX 200 slipped 0.1%. Hong Kong’s Hang Seng Index was little changed, while mainland China’s CSI 300 was down 0.5% and India’s Nifty 50 was under pressure, falling 1%. Oil futures were little changed, with Brent crude trading around USD 105 per barrel, while West Texas Intermediate (WTI) crude was close to USD 96.

Japan inflation edges higher on energy

Japan’s core consumer prices rose 1.8% in March, up from 1.6% in February and in line with economists’ expectations, as the Iran conflict added upward pressure on energy costs, according to data released on Thursday. Headline inflation increased to 1.5%, compared with 1.3% in February, remaining below the Bank of Japan’s 2% target for a second month, while the "core-core" measure excluding both food and energy eased to 2.4% from 2.5%, its lowest level since October 2024. The government has sought to cushion households from higher fuel costs with measures such as fuel subsidies, a planned cap on gasoline prices and the release of crude reserves, helping to drive a 5.7% drop in energy prices in March. Analysts expect elevated oil prices to push core inflation toward 3% by the end of the 2026 fiscal year and see this supporting the BOJ’s gradual tightening bias, with the central bank widely anticipated to keep its key rate at 0.75% at its late-April meeting even as it prepares to raise its inflation forecast and trim growth projections.

US equities retreat on Iran concerns

US stock indices slipped on Thursday after recent record highs as renewed geopolitical tensions around the Iran war and reports of internal power struggles in Tehran weighed on sentiment. The Dow Jones Industrial Average fell 0.4% to 49,310.32 points and again lagged behind, while the S&P 500 lost 0.4% to 7108.40 points and the Nasdaq 100 declined 0.6% to 26,782.63 points after both broader benchmarks had set intraday records earlier in the session. Software names came under heavy pressure amid revived worries about the impact of artificial intelligence and slower demand linked to the Iran conflict, with ServiceNow plunging almost 18% after disappointing quarterly figures and weak comments on orders, and major groups such as Microsoft, Salesforce, Oracle, Adobe and IBM dropping between about 4% and more than 8%. In contrast, semiconductor stocks advanced, led by Texas Instruments, which surged around 19% after strong quarterly results and an upbeat annual outlook tied to data centre spending. Intel shares also surged more than 16% in after-hours trading on Thursday after the US semiconductor group reported first-quarter results that comfortably exceeded analysts’ expectations and issued an upbeat outlook driven by strong data centre demand.

In macroeconomic data, US initial claims for state unemployment benefits rose to a seasonally adjusted 214,000 in the week ended 18 April, an increase of 6000 from the prior week, according to data released on Thursday. The level of claims, which roughly matched economists’ expectations, continues to signal a broadly stable labour market despite weaker hiring appetite.

Eurozone PMI signals war‑driven downturn

Eurozone private‑sector activity slipped into contraction in April, with the flash composite PMI falling to 48.6 from 50.7 in March, its lowest reading in 17 months, according to data collected between 9 and 21 April and released on Thursday. Services activity declined for the first time in almost a year and at the sharpest pace since early 2021, while manufacturing output and the manufacturing PMI rose to their strongest levels in several months, partly driven by precautionary stockbuilding amid supply concerns. The war in the Middle East pushed input costs and output prices to their highest monthly increases in more than three years, exacerbated supply‑chain delays and weighed on business confidence, which fell to its weakest level since late 2022. European stock markets ended Thursday mixed, with most major indices posting modest declines. The Euro Stoxx 50 slipped 0.3%, while Germany’s DAX eased 0.2%. France’s CAC 40 bucked the trend, gaining 0.9%, whereas the Swiss Market Index outperformed, rising 1.4%.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Procter & Gamble.

Economic data in focus: UK retail sales (08:00), French consumer confidence (08:45), ifo Business Climate Index for Germany (10:00), Swiss National Bank Chairman Martin Schlegel speaks (10:00), central bank interest rate decision of the Bank of Russia (12:30), Canadian retail sales (14:30) and University of Michigan Consumer Sentiment Index (16:00).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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