On Monday, data from China showed industrial output grew by 6.3% over January-February, up from 5.2% in December. Retail sales also picked up, rising 2.8% compared with 0.9% at the end of 2025. This increase was likely supported by the extended Lunar New Year holiday, which saw a sharp rise in domestic travel and dining activity. Catering revenue, for instance, climbed 4.8% year-on-year in January – February; an acceleration of 2.6 percentage points from December. A spokesperson for China’s National Bureau of Statistics said authorities will continue to leverage the country’s large domestic market by implementing targeted measures to boost consumption. Plans are also being developed to raise incomes for both urban and rural residents, with the aim of sustaining economic expansion.
In Japan, policymakers are widely expected to keep interest rates unchanged at 0.75% following Thursday’s monetary policy meeting. Bank of Japan Governor Kazuo Ueda said this week that inflation is moving closer to the 2% target but emphasised that this progress must be accompanied by stable and sustained wage growth. His remarks are likely to be welcomed by Prime Minister Sanae Takaichi, who has advocated for price increases driven by stronger consumption rather than by firms passing on higher input costs.
Iran carried out successful attacks on production facilities for the first time since the start of the war with the U.S. and Israel, prompting a renewed rise in oil and gas prices on Tuesday. Brent crude – the global benchmark for oil prices – briefly breached $100 per barrel at the time of writing. Tensions remain elevated, with Iran vowing a “decisive and regrettable” retaliation following Israel’s killing of senior figures, including its security chief and a Basij commander. Despite this conflict, it has been a relatively positive week for markets so far, with some investors appearing to “buy the dip” amid ongoing uncertainty. The UK’s FTSE 100, for example, rose 0.8% yesterday, reflecting a degree of optimism. Markets continue to swing between relief rallies and periods of caution as traders assess the evolving situation, with some hope that a coalition could emerge to ensure shipping continues through the strait. While heightened volatility is expected in the short term, analysts highlight a notable degree of market resilience as the conflict progresses. Strong pre-war fundamentals – including solid U.S. economic momentum, corporate earnings growth, moderating inflation, and a stable labour market – are helping to underpin markets, leaving them relatively well-positioned to absorb ongoing uncertainty as the situation plays out.
Meanwhile, investors are focusing on the Bank of England’s policy decision, also due on Thursday. Markets expect rates to remain at 3.75%, with traders increasingly convinced that the Bank has reached the end of its recent easing cycle. Policymakers are likely to remain cautious about further cuts, particularly given the risk of rising energy prices stemming from ongoing tensions in the Middle East. We also have the Fed’s interest rate decision expected later today, with markets anticipating rates will be kept unchanged in the 3.5%–3.75% range. Attention will also be on any guidance from Fed Chair Jerome Powell, particularly around whether rising oil prices could influence future monetary policy decisions.
We also have the UK’s unemployment rate to come as well as the ECB’s latest interest rate decision.
Nicola Tune, Portfolio Specialist
