Blog week ending, 27th March 2026
Markets:
- Local and global stock markets faded as the week progressed, after a sharp early rebound sparked by reports the US had postponed strikes on Iran’s power plants. Non-US stocks continued their run over US stocks.
- Government bond yields continued to rise this week as investor concerns grew about the inflationary consequences of the war, with the likelihood of further central bank rate hikes increasing.
- In local stock news, Ampol and Viva Energy shares rose after the Federal Government flagged subsidies aimed at keeping fuel plants operating when costs exceed market fuel prices.
- Rio Tinto shares received a boost after the company secured around $2 billion in government subsidies to keep its Boyne aluminium smelter operating.
- Gold prices rebounded during the week but remain more than 20% below their January peak, having erased year-to-date gains as rising rate-hike expectations weigh on sentiment.
- Oil prices fell sharply early in the week on the hopes of de-escalation with Iran before rebounding later as the conflict continued. More than forty energy assets across nine Middle Eastern countries have reportedly been severely damaged, raising the risk that supply disruptions outlast the conflict itself.
- The Australian dollar weakened against the US dollar as risk-averse currency markets favoured safe-haven currencies.
Economics:
- Australian inflation eased slightly to 3.7% in February on an annualised basis, below expectations of 3.8%. Price growth moderated across goods, transport, alcohol and tobacco, and clothing. The RBA’s preferred underlying measure came in at 3.3%, down from January’s 3.4% rise.
- An Australian business activity survey conducted in March showed the first contraction in over two years, driven by a shape slowdown in services activity. New business fell as demand softened, while unemployment growth slowed to its weakest pace in four months. Business confidence declined to a twenty-month low.
- US Federal Reserve officials signalled openness to rate cuts later this year even as government bond yields continue to rise. One policymaker pointed to ongoing strong economic growth, while another highlighted expectations for a weaker labour market and easing inflation.
- US manufacturing activity expanded in March beating expectations. Production strengthened and new orders recorded their strongest increase since October 2025. However, employment growth slowed to an eight-month low and supplier delivery times lengthened.
- The European Central Bank left interest rates unchanged at their March meeting, reaffirming its commitment to stabilising inflation. The ECB lifted its inflation projections and warned that the Iran conflict creates upside risks for inflation and downside risks to economic growth.
- European manufacturing activity also expanded in March exceeding forecasts and marking the strongest growth in almost four years. New orders continued to rise, export orders showed signs of stabilisation, and employment levels declined only modestly.
- Germany’s consumer sentiment deteriorated in March, coming in below expectations and falling to its weakest level since March 2024, as households brace for a surge in energy costs.
- The Bank of England unanimously voted to keep interest rates at 3.75% in March, while closely monitoring developments in the Middle East and financial markets given the impacts of higher energy prices on inflation. Prior to the conflict, domestic price and wage had been easing.
- UK inflation steadied at 3% in February, unchanged from January and in line with expectations.
- Japanese core inflation declined below 2% reflecting the impact of government energy subsidies.
- The Chinese central bank left its key lending rates unchanged at record lows for a tenth straight month in March in line with expectations.
- Indian manufacturing activity slowed in March from February, coming in below forecast and marking the weakest pace of expansion in factory activity since September 2021.
Politics:
- In another shifting White House update on the Iran conflict, President Trump said the US is close to achieving its objectives and is considering winding down the war, claiming talks with Iran have been productive. Iran swiftly denied that any discussions had taken place.
- At the same time, President Trump warned the US could strike Iranian power plants unless Iran reopened the Strait of Hormuz within 48 hours. Missile exchanges between Israel and Iran continued for much of the week. Trump has since followed up by increasing the deadline to re-open the Strait to 10 days.
- Reports indicated the US drafted a fifteen-point plan aimed at ending the conflict, reportedly delivered to Iran via Pakistan. Despite this, Iran’s long-range missile attacks continued, while the US ordered additional troop deployments to the region.
- Late in the week, Iran was reported to have rejected a US ceasefire proposal. The US plan reportedly requires Iran to dismantle its nuclear facilities and restrict missile use to self-defence. Iran’s counter demands include guarantees against renewed US or Israeli attacks, compensation for war damage, and recognition of its control over the Strait of Hormuz.
- China moved to limit exports of fertiliser, jet fuel, and diesel to secure domestic supply, while also urging Iran to engage in talks with the US. President Trump is scheduled to meet Chinese President Xi in Beijing on 14/15 May, with Xi expected to visit the US later in year.
- Australia and the European Union have reached agreement on a “free-trade” deal, concluding nearly a decade of negotiations between the two sides.
Written by Christopher Lioutas
Chairman – Harbourside Investment Management
