Weekly market review - 23 February 2026

A broadly positive week for global equities, as favourable macroeconomic data supported investor sentiment. UK and European equities extended their year-to-date outperformance of the US, while Japan took a breather following an exceptionally strong start to 2026.

US: POLICY MAKERS SPLIT ON NEAR-TERM INTEREST RATE CUTS

US equities finished the shortened week higher, with markets rallying on Friday after the Supreme Court overturned President Trump’s global tariffs, boosting sentiment. The Nasdaq led gains with its first weekly rise since early January, while the S&P 500 and MidCap 400 also advanced more than 1 percent.

Fed minutes showed a clear split among policymakers, with some open to further easing while others warned higher rates may still be required if inflation stays sticky. The Fed’s preferred inflation metric, core PCE, reaccelerated to 0.4 percent month on month and 3.0 percent year on year, reinforcing concerns that disinflation has stalled.

Meanwhile, US GDP slowed sharply to 1.4 percent in Q4 as government spending, exports, and consumer activity softened, and business surveys echoed a cooling trend. Housing data painted a mixed picture: builder confidence and pending sales slipped, but delayed Census figures showed housing starts bouncing strongly to end the year.

JAPAN: INFLATION COOLS TO SLOWEST PACE IN 2 YEARS

Japanese equities slipped modestly following a period of strong returns, with the Nikkei 225 index up almost 13% (in JPY terms) so far this calendar year. Geopolitical tensions dampened global risk appetite and domestic data showed a softer economic backdrop.

Growth in Q4 returned to positive territory but was significantly weaker than expected, driven by a sharp slowdown in private consumption. Inflation cooled to its slowest pace in two years at 2.0 percent year on year, reflecting weaker food and fuel pressures.

CHINA: INTERNATIONAL MONETARY FUND UPGRADES 2026 CHINA GROWTH FORECAST TO 4.5%

Mainland Chinese markets were closed throughout the week for Lunar New Year and will reopen on 24 February. The International Monetary Fund upgraded its 2026 growth forecast to 4.5 percent but emphasized the need for China to pivot decisively toward a consumption led model to address structural challenges.

The US briefly published, then withdrew, an updated list of Chinese companies allegedly tied to military activity, prompting strong denials from Alibaba and Baidu. The confusion added to uncertainty ahead of potential future trade restrictions, highlighting the fragile state of US China economic relations.

EUROPE: STOCKS REACH ALL-TIME HIGHS ON IMPROVING EARNINGS EXPECTATIONS AND RESILIENT ECONOMIC DATA

European equities hit fresh records throughout the week, as improving earnings expectations, supportive macroeconomic data and a rotation out of Tech-heavy US equities the key drivers. Germany’s DAX rose 1.39%, Italy’s FTSE MIB climbed 2.29%, and France’s CAC 40 Index gained 2.45%.

Eurozone industrial production weakened more than forecast in December, but February’s PMI surprised positively with the fastest rise in new orders in nearly four years. German investor confidence unexpectedly dipped from a five-year high, interrupting its recent upward trend. Speculation over ECB President Christine Lagarde potentially stepping down early added intrigue, with Spain openly positioning itself for the role.

UK: EQUITIES HIT ALL-TIME HIGH AMID EXPECTATIONS FOR FURTHER NEAR-TERM INTEREST RATE CUTS

UK equities rallied to all-time highs throughout the week, as expectations for further interest rate cuts boosted investor sentiment. Consumer price index (CPI) inflation eased to 3.0% year on year in January, its lowest level in almost a year, thanks in part to lower fuel prices.

On the jobs front, the UK’s unemployment rate hit a near five-year high of 5.2% in the three months to December, according to the Office for National Statistics. Wage growth also slowed over the same period. These factors have underpinned expectations for the Bank of England to cut interest rates as soon as March. Meanwhile, retail sales in January drove the UK to a record £30bn surplus during the month.