Market Review 20th April 2026

Everything you need to know, Simplified!

Summary

• Equities rebound sharply to record highs, with global markets up 3.9% in USD terms, supported by strong earnings, resilient data and easing geopolitical tensions

• The ceasefire between the US and Iran supports sentiment but risks linger, with lower oil prices offset by ongoing disruption in the Strait of Hormuz and fragile regional dynamics

• Gilt demand surges despite higher yields, with a record UK syndication highlighting strong appetite amid improved valuations

• UK inflation in focus this week, with March CPI expected to rise to 3.3%, driven largely by higher fuel prices and geopolitical effects.

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Market Review

Upbeat earnings drive equities back to highs

A strong start to earnings season helped push equities back to record highs. Global equities gained 3.9% in USD terms with the technology sector once again the best performing sector, notching a 7.7% return. The rally, led by US stocks, was supported by a combination of resilient economic data, robust earnings, and most prominently, easing geopolitical tensions.

Perhaps most striking is the speed of the recovery. Equity markets have returned to highs after hitting lows just over a fortnight ago, one of the fastest rebounds of its kind. Last week was the first time the US market gained more than 3% for a third consecutive week. Market leadership remains highly rotational as the losers have become winners.

The US-Iran ceasefire, alongside signs of broader regional de-escalation after confirmation from Iranian Foreign Minister Abbas Araghchi that the Strait of Hormuz was “fully open”, supported sentiment and drove a sharp decline in oil prices. As has often been the case in this conflict, developments over the weekend have complicated the picture. Tanker crossings in the Strait have barely shown any recovery. Iranian gunboats attacked a tanker while the US seized and boarded an Iranian vessel.

The equity market recovery has felt almost instantaneous. The move does leave markets vulnerable to a deterioration in the conflict. There is also an underlying assumption that any lasting ceasefire will return things back to the previous equilibrium but much like putting a genie back in a bottle restoring trade through the Strait of Hormuz could prove more difficult. That said, as long as fundamentals and economic data remain robust, investors may continue to prioritise the fundamental picture over the murky waters of the Hormuz.

UK government bonds draw record demand

Price pressures in the gilt market (UK government bonds) have eased in April while demand has proved strong at current higher yield levels. The UK Debt Management Office issued a record £15bn in a ten-year gilt syndication which attracted demand of nearly ten times the amount issued.

Gilts in the two to seven year sector continue to yield up to around 4.4% - around 0.5% higher than at the end of February - offering an attractive yield in the context of subdued economic conditions. While inflation may remain elevated in the short term, most medium term projections still point to moderation over coming years. The OECD, for example, expects UK CPI to average around 4% in 2026 before falling to approximately 2.6% in 2027. Although forecasts are particularly difficult in the current climate the case for rate hikes appears limited against a backdrop of soft growth and rising unemployment.

Although it has adjusted lower, market pricing for the Bank of England (BoE) base rate nevertheless continues to imply further tightening this year, a stance that remains difficult to reconcile with policymakers’ recent messaging. Immediately following the March Monetary Policy Committee meeting, BoE Governor Andrew Bailey cautioned against reaching any strong conclusions on rate hikes while Committee members through March and April continued to emphasise a challenging economic backdrop.

This suggests a relatively high bar for additional rate increases, particularly if incoming data continue to point to a weak economy. Policymakers would likely opt to look through the near term inflationary impulse.

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The week ahead

Wednesday: UK inflation

Inflation is expected to have risen to 3.3% in March showing the first impact of the US-Iran war. Fuel prices will be the main contributor having risen an expected c.9%. Bloomberg economics’ baseline scenario puts inflation ending the year 1.3% above their pre-war scenario, much depends however on geopolitical developments from here.

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