Week commencing 27 April 2026

ASX 200 diverges from Wall Street as inflation and geopolitics loom

After the S&P 500 and the Nasdaq 100 hit fresh record highs earlier in the week, the ongoing United States (US) - Iran standoff has dampened hopes of an imminent resolution to the Middle East conflict. This lingering uncertainty has prompted investors to trim positions and take some well‑earned profits in US equity markets following their strong gains earlier this month.

Locally, the ASX 200 is on track to finish the week roughly 2% lower around the 8770 level, looking increasingly disconnected from the previously buoyant mood offshore. A key driver of this divergence has been a combination of stock‑specific weakness and mounting energy security concerns.

However, the domestic focus is now shifting squarely to next week. With the March consumer price index (CPI) release looming, the market is bracing for what will be the first inflation report to fully capture the energy shock stemming from the Middle East conflict. Arriving just days before the Reserve Bank of Australia’s (RBA) next board meeting on 5 May, this crucial print will likely cement the case for a third consecutive 25 basis point (bp) rate hike this year.

The week that was: highlights

• US retail sales for March rose a stronger‑than‑expected 1.7% month-on-month (MoM), beating the 1.4% consensus forecast and accelerating from the prior month’s revised 0.7% gain
• The US retail sales control group, which feeds into gross domestic product (GDP), climbed 0.7% MoM in March, well above expectations of a 0.2% rise
• US initial jobless claims came in slightly higher than expected at 214,000, missing the 212,000 consensus estimate but still indicating a relatively tight labour market
• US business activity gained momentum in April, with the S&P Global manufacturing purchasing managers’ index (PMI) flash reading jumping to 54.0 against a 52.5 consensus, while the services PMI rose to 51.3 from 49.8 previously
• Japan’s (JP) S&P Global manufacturing PMI flash for April surged to 54.9, well above the 51.2 consensus, while the services PMI flash eased to 51.2 from 53.4 previously
• Japanese headline inflation accelerated to 1.5% year-on-year (YoY) in March from 1.3%, while core inflation rose to 1.8%, both in line with expectations
• The United Kingdom (UK) unemployment rate for February surprised to the downside, falling to 4.9% against a 5.2% consensus forecast
• UK inflation for March met expectations, rising to 3.3% YoY from 3.0% in the previous month, while core inflation eased slightly to 3.1% YoY
• The UK manufacturing PMI flash for April jumped to 53.6 from 51.0, while the services PMI flash rose to 52.0 from 50.5 previously
• Euro area business activity unexpectedly contracted, with the composite PMI flash falling to 48.6 against a 50.2 forecast
• New Zealand (NZ)inflation rose 0.9% quarter-on-quarter (QoQ) in the first quarter (Q1), exceeding the 0.8% consensus forecast and accelerating from 0.6% previously
• Australia’s (AU) S&P Global manufacturing PMI flash for April returned to expansion territory at 51.0, beating the 49.0 consensus, while the services PMI flash also surprised to the upside at 50.3
• West Texas Intermediate (WTI) crude oil surged 17.35% to $96.92
• The US dollar index (DXY) rose 0.60% to 98.82
• Bitcoin climbed 14.74% to $78,270
• Gold slipped 2.82% to $4695
• Wall Street’s gauge of fear, the volatility index (VIX), rose to 19.30 from 17.47 in the previous week.

Key dates for the week ahead

Australia & New Zealand

• AU – CPI: Wednesday, 29 April at 11.30am AEST
• NZ – ANZ business confidence: Thursday, 30 April at 11.00am AEST
• AU – producer price index (PPI): Friday, 1 May at 11.30am AEST

China & Japan

• JP – Bank of Japan (BoJ) interest rate decision: Tuesday, 28 April at 1.00pm AEST (no change expected)
• CN – National Bureau of Statistics (NBS) manufacturing PMI: Thursday, 30 April at 11.30am AEST
• CN – NBS non‑manufacturing PMI: Thursday, 30 April at 11.30am AEST
• CN – RatingDog manufacturing PMI: Thursday, 30 April at 11.45am AEST

United States

• US – Conference Board consumer confidence: Wednesday, 29 April at 12.00am AEST
• US – durable goods orders: Wednesday, 29 April at 10.30pm AEST
• US – Federal Reserve (Fed) interest rate decision: Thursday, 30 April at 4.00am AEST
• US – core personal consumption expenditures (PCE) price index (MoM): Thursday, 30 April at 10.30pm AEST
• US – personal income (MoM): Thursday, 30 April at 10.30pm AEST
• US – personal spending (MoM): Thursday, 30 April at 10.30pm AEST
• US – Institute for Supply Management (ISM) manufacturing PMI: Saturday, 2 May at 12.00am AEST

Europe & United Kingdom

• EA – GDP Q1 flash: Thursday, 30 April at 7.00pm AEST
• EA – CPI: Thursday, 30 April at 7.00pm AEST
• UK – Bank of England (BoE) interest rate decision: Thursday, 30 April at 9.00pm AEST
• EA – European Central Bank (ECB) interest rate decision: Thursday, 30 April at 10.15pm AEST

Key events for the week ahead

AU: CPI

Date: Wednesday, 29 April at 11.30am AEST

February saw a modest easing in headline inflation pressures. Headline CPI fell to 3.7% YoY from 3.8% in January, slightly below expectations, while the RBA’s preferred trimmed‑mean measure held steady at 3.3%.

Key drivers included continued strength in housing (+7.2% YoY), electricity (up 37.0% annually from subsidy unwind) and services, although a sharp decline in petrol prices provided temporary relief to the headline figure.

Looking ahead to next Wednesday’s release, this will be the first inflation report to fully capture the energy shock from the Middle East conflict.

Headline CPI for March is expected to surge to 4.8% YoY, while the trimmed‑mean measure is forecast to rise to 3.4%. On a quarterly basis, the trimmed mean is expected to increase to 3.5% from 3.4%. All three readings sit well above the midpoint of the RBA’s 2% - 3% target band, even before the sharp spike in petrol prices during March. This has reinforced the RBA’s hawkish bias and heightened concerns around a persistent supply shock.

This print arrives just days before the RBA’s next board meeting on 5 May, where a third consecutive 25 bp rate hike is widely anticipated. The Australian rates market is currently pricing around 19 bp of tightening for that meeting, with approximately 60 bp of hikes expected for the remainder of 2026.

AU all groups CPI and Trimmed mean chart

US: Fed interest rate decision

Date: Thursday, 30 April at 4.00am AEST

At its March meeting, the Federal Open Market Committee (FOMC) maintained the federal funds target range at 3.50% - 3.75%, reinforcing a data‑dependent stance while acknowledging greater uncertainty stemming from the escalating Middle East conflict and rising energy prices.

The March dot plot continued to signal a single 25 bp rate cut in 2026, although the minutes showed that the oil‑driven inflation shock has complicated the outlook. Some members favoured delaying any easing, while others stressed the need to retain flexibility should tighter policy be required.

No change is widely expected at next week’s meeting, with futures markets pricing a near‑certain probability of a hold. Attention will again focus on Chair Powell’s press conference for any shifts in tone.

The US rates market is now pricing just 7 bp of easing for the whole of 2026, a significant reduction from the roughly 60 bp priced in at the end of February.

Fed funds rate chart

UK: BoE interest rate decision

Date: Thursday, 30 April at 9.00pm AEST

At its March meeting, the BoE held the official bank rate steady at 3.75% on a unanimous 9-0 vote, a notable shift from February’s narrow 5-4 decision. The committee struck a more hawkish tone, citing the Middle East conflict and higher global energy prices as new sources of inflation uncertainty.

The central bank revised its forecasts higher, now projecting inflation to rise towards 3.5% by mid‑year.

‘The Committee will continue to monitor closely the situation in the Middle East and its impact on global energy supply and energy prices. It stands ready to act as necessary to ensure that CPI inflation remains on track to meet the 2% target in the medium term.’

The March inflation report released this week showed headline CPI rising to 3.3% YoY from 3.0%, broadly in line with expectations and reflecting the initial impact of the energy supply shock. However, the core measure eased slightly to 3.1% from 3.2%, which helped ease immediate fears of a rate hike at next week’s meeting.

Nevertheless, with the Strait of Hormuz still closed, energy prices are expected to remain elevated and continue feeding into broader price pressures. Adding to the complexity, the UK’s February unemployment rate surprised to the downside, falling to 4.9% against a consensus forecast of 5.2%.

The UK rates market is currently pricing in a full 25 bp rate hike for the July meeting, with another 25 bp move expected before the end of the year.

BoE official bank rate chart

EA: ECB interest rate decision

Date: Thursday, 30 April at 10.15pm AEST

At its last meeting in March, the ECB kept its deposit facility rate unchanged at 2.00%. The Governing Council delivered a clear hawkish pivot, acknowledging that the escalating conflict in the Middle East and the resulting surge in energy prices had clouded the disinflation path and introduced upside risks to inflation. Staff projections were revised higher for inflation, at 2.6% in 2026, and lower for growth, at 0.9% in 2026, with President Lagarde reintroducing the phrase ‘closely monitoring’, a signal of heightened alertness last used during previous periods of stress.

While no change in rates is anticipated at next week’s meeting, the ongoing disruption in the Strait of Hormuz has only intensified inflationary concerns. Lagarde and other ECB officials have emphasised the need to watch for any broadening of the energy shock into core prices, wages and selling‑price expectations, in an effort to distinguish between a temporary supply‑side shock and one that requires a policy response.

After spending the early part of 2026 pricing in multiple rate cuts, the European rates market has aggressively repriced in recent weeks. A first 25 bp rate hike is now fully priced for the ECB’s July meeting, with a second 25 bp hike priced before the end of the year.

ECB deposit rate chart

US Q1 2026 earnings

US Q1 2026 earnings season ramps up with earnings reports from companies including Spotify, UPS, BP, Visa, Robinhood Markets, Starbucks, Amazon, Microsoft, Meta, Google owner Alphabet, Qualcomm, Caterpillar, Apple and many more.