Week Ahead Report — 23rd March 2026

📊 Last Week in Review (Week ending 21 March 2026)

Performance snapshot (levels + weekly % + YTD):

FTSE 100: 9,918.33 | -3.3%
S&P 500: 6,506.48 | -1.9%
MSCI World: 4,244.09 | -2.0%
UK 10y gilt yield: 5.00% (+14.7 bp on Friday) | US 10y: 4.38% (+10.1 bp)
GBP/USD: 1.3376 (+1.2% w/w) | Brent: $112.19 (+3.3%)

What moved markets:

The main shock was oil. Brent pushed above $112 as the Middle East war raised fears of a longer energy disruption and a renewed inflation pulse.
That fed straight into rates. Investors sold government bonds and sharply reduced rate-cut hopes, with U.S. and UK yields jumping and markets starting to price a much more hawkish path.
Equities then de-rated on both fronts: higher discount rates and weaker growth confidence. The S&P 500 logged a fourth straight weekly fall and the FTSE 100 gave back its 2026 gains.

Sector & style:

Worst sector: UK aerospace & defence -2.5% on Friday; banks were also hit at -2.0%.
Best sector: energy was the relative winner, staying near record highs even after a -1.7% Friday pullback.
Growth vs Value: value held up better, with the Dow beating the Nasdaq by roughly 1.0 percentage point on Friday.
Large vs Small: in the UK, FTSE 250 outperformed FTSE 100 by about 0.4 percentage points on Friday.

So what?

Markets enter this week in a fragile state: both the BoE and Fed have taken rate cuts firmly off the near-term table, leaving equities to stand on their own earnings fundamentals — a tough ask with margins under cost pressure

🌟 The Defining Narrative

Can markets absorb an oil shock without fully repricing to stagflation?

Why it matters :

Higher oil pushes up inflation expectations, lifts bond yields and makes central banks less able to ease. That hits equities twice: once through a higher discount rate, and again through weaker confidence in margins and growth.

UK investor angle :

A UK global portfolio is pulled in two directions: energy-heavy UK equities can cushion part of the shock, but gilts and growth equities become more vulnerable if rate expectations keep rising.
Sterling may hold up better than many expected if the BoE stays hawkish, but that can also trim the GBP value of unhedged overseas gains.

🏦 Central Bank Watch

No rate decisions are scheduled this week following the central bank meetings last week

Bank of England

What’s scheduled: BoE speakers this week include Huw Pill on Tuesday 13:30, plus Sarah Breeden on Thursday 09:30, Megan Greene on Thursday 16:30, and Alan Taylor later Thursday.
Market pricing: markets are now pricing roughly a 70% chance of a 25bp BoE hike by April.
Key thing to listen for: whether officials describe the energy shock as a temporary hit or something that risks broader wage and price persistence.
UK implications: this is directly about gilts, mortgage pricing and GBP. A hawkish read-through keeps upward pressure on short gilts and supports sterling.

Federal Reserve

What’s scheduled: Fed Chair Powell speaks on Tuesday 17:30 UK, with several Fed officials also due later in the week.
Market pricing: markets have swung from pricing cuts to pricing roughly 4bp of hikes this year.
Key thing to listen for: whether Fed speakers lean into “wait and see” or acknowledge that energy-driven inflation risks are becoming policy-relevant.

🌍 Macro Calendar

Tue 24 Mar, 08:30 — Germany — Flash Manufacturing PMI — Consensus: ~51.0

Tue 24 Mar, 08:30 — Germany — Flash Services PMI — Consensus: ~52.5

Tue 24 Mar, 09:00 — Eurozone — Flash Composite PMI — Consensus: ~52.0

Tue 24 Mar, 09:30 — UK — Flash Manufacturing PMI — Consensus: ~47.5

Tue 24 Mar, 09:30 — UK — Flash Services PMI — Consensus: ~54.0

Tue 24 Mar, 13:45 — US — Flash S&P Global Composite PMI — Consensus: ~52.0

Wed 25 Mar, 07:00 — UK — CPI (Feb, YoY) — Consensus: ~3.2%

Wed 25 Mar, 07:00 — UK — Core CPI (Feb, YoY) — Consensus: ~3.2%

Wed 25 Mar, 00:30 — Australia — Monthly CPI (Trimmed Mean) — Consensus: ~3.8%

Thu 26 Mar, 13:30 — US — Durable Goods Orders (MoM) — Consensus: ~+0.5%

Thu 26 Mar, 13:30 — US — Initial Jobless Claims — Consensus: ~220k

Fri 27 Mar, 07:00 — UK — Retail Sales (Feb, MoM) — Consensus: ~+0.3%

📊 Earnings Watch

No FTSE 100 heavyweights or US mega-caps report this week — it sits between major earnings seasons. However, a handful of names merit attention:

UK / Europe

NEXT (NXT) — Thursday:
- What matters: FY results, guidance and commentary on UK consumer spending.
- The “tell” headline: margin resilience despite wage and cost pressure would be taken well.
- Read-across: UK retail, domestic demand and FTSE earnings quality.
H&M (HM B) — Thursday:
- What matters: inventory discipline, markdowns and gross margin.
- The “tell” headline: a cleaner margin story would support the idea that European consumption is slowing, not collapsing.
- Read-across: apparel, European discretionary and input-cost discipline.

US:

Carnival (CCL) — Friday:

What matters: booking trends, onboard spending and fuel-cost commentary.
The “tell” headline: if demand stays strong even with higher energy costs, travel can still hold up.
Read-across: leisure, airlines and the wider consumer confidence trade.

💷 Fixed Income & Currency Outlook

A) UK Gilts / Rates

Facts: 10y Gilt at ~4.60%, 2y at ~3.88%, 30y at ~5.44% — the curve is steeply positive (30y–2y spread ~156 bps), reflecting both term premium and long-dated inflation concerns
View: Neutral to Underweight duration — the BoE’s hawkish pivot removes the near-term catalyst for yield compression; Wednesday’s CPI is the swing factor
Watchlist: UK CPI Wednesday; any MPC member speech; DMO gilt issuance calendar
Portfolio angle: Favour short-duration gilts (2–5y) over the long end; gilts underperform global bonds if CPI surprises to the upside

B) FX (GBP focus)

Facts: GBP/USD 1.3340 (down 0.67% on the week, down 1.13% over one month but up 3.24% YoY)
View: Range-bound to slightly bearish GBP near-term — the BoE hold removes a hawkish GBP catalyst; rate differential with USD remains compressedtradingeconomics+1
Watchlist: UK CPI (Wed) — a downside surprise accelerates GBP weakness; risk-off from Middle East escalation supports USD over GBP
Portfolio angle: Unhedged US equity exposure gets a small currency tailwind if GBP/USD drifts toward 1.32; European equity holdings face modest GBP headwind if EUR/GBP firms on German PMI beat

🧠 Sentiment Check

Current mood: Risk-off
VIX / MOVE: VIX near 27; CNN Fear & Greed at 15, which is squarely extreme fear. Reuters’ MOVE quote page also shows bond volatility up 69% over one month as of 20 March.
Rates: U.S. 10y yields rose to about 4.38% on Friday and were back near 4.42% early Monday.
Credit spreads: market stress indicators have widened, with Reuters noting higher corporate hedging costs and wider high-yield spreads.
CNN FEAR & GREED INDEX: 15 to 17.3, which says investors are defensive and quick to fade rallies.

Positioning / flows (2–4 bullets):
- EPFR data showed $20.3bn pulled from global equity funds in the week to 18 March, the biggest outflow in three months.
- At the same time, BofA said investors still put $62.2bn into equities, $10.2bn into bonds and $23.5bn into cash — classic “buy the dip, but keep a cushion” behaviour.
Implication (1–2 bullets):
- Sentiment is weak enough for relief rallies, but not washed out enough to assume the downside is exhausted.
- That means this week still looks like a headline-sensitive market, not a conviction trend market.

📈 Valuations & Expectations

Valuation snapshot:

S&P 500 fwd P/E: ~21x — above its 10-year average of ~18x; the index remains priced for earnings perfection at a time when YTD returns are deeply negative
FTSE 100 fwd P/E: ~11–12x — materially cheaper, reflecting UK macro headwinds but also structural undervaluation relative to history
Implication: The US market offers far less margin of safety; FTSE 100’s discount is compelling for long-term value investors but requires confidence in UK earnings resilience

Earnings expectations:

Next-year EPS growth (consensus): US ~8–10% (under downward revision pressure as rate path expectations reset) | UK ~5–7% (energy/mining heavyweights providing support)
Revisions trend: Deteriorating in the US (rate shock, input cost pressure, tariff overhang); UK revisions mixed — energy up, consumer and housebuilders down
Beat-rate context: Not peak earnings season; macro data surprises will dominate EPS narrative this week

So what?

For US equity positions, the core risk is multiple compression — not an earnings disaster, but a slow re-rating from ~21x toward ~18x as rates stay higher for longer
UK equities look cheap on paper but need confirmation that domestic consumption isn’t rolling over — this Friday’s Retail Sales print is therefore a valuation catalyst, not just a data point

🗳️ Geopolitics & Wildcards

Event: Middle East conflict — US/Israeli strikes on Iran (28 Feb); ongoing disruption to Strait of Hormuz shipping
- Impact channel: Oil prices, LNG, global inflation, shipping costs
- What to watch: Any escalation involving Jebel Ali/Gulf ports or tanker interdiction; Brent crossing $90 would re-price inflation paths globallyreuters+1
- Most sensitive assets: Brent crude, energy equities, GBP (UK import bill), EM FX, airline stocks
Event: US trade tariff posture — ongoing uncertainty over scope and exemptions
- Impact channel: Global supply chains, corporate margins, US consumer prices
- What to watch: Any White House announcement on tariff escalation or exemption deals
- Most sensitive assets: Industrials, semiconductors, S&P 500 broadly, USD
Event: European defence spending ramp-up — German fiscal U-turn and EU rearmament plans
- Impact channel: Defence equities, European bond yields (issuance rising), EUR
- What to watch: Any new national procurement announcements or EU-level bond issuance confirmation
- Most sensitive assets: European defence stocks (Rheinmetall, BAE Systems), Bunds, EUR/GBP

⚡ The Bottom Line

If Middle East tensions escalate further (Hormuz disruption widens) → then Brent surges, energy equities outperform sharply, and central banks face a stagflationary bind → watch UK-listed BP and Shell
If flash PMIs hold up better than feared while Gulf headlines stabilise → then equities can stage a relief rally even without rate-cut hopes returning → watch the S&P 500 around 6,500 and whether the VIX eases back from the high-20s.
If UK CPI (Wednesday) surprises to the upside (>3.4% YoY) → then gilt yields spike and BoE May cut gets fully priced out → watch GBP/USD break below 1.32 and FTSE 100 housebuilders/REITs sell off sharply