Market Review 2nd March 2026

Everything you need to know, Simplified!

Summary

• Geopolitical tensions surged as the US and Israel launched strikes killing Iran’s Supreme Leader, prompting widespread regional retaliation and raising fears of a major oil supply shock

• US equities fell amid continued AI disruption concerns and heightened trade policy uncertainty following the US Supreme Court’s tariff ruling

• In contrast, UK, European and Japanese markets rallied as investors rotated away from US mega cap technology into regions with more attractive valuations and improving policy and macro environments

• US producer prices came in higher than expected, complicating the disinflation trend, even as Treasury yields fell below 4% on safe haven demand

• China’s markets advanced as investors returned from Lunar New Year and looked to upcoming policy signals.

---

Market Review

Middle East: Escalation triggers global risk off positioning

Investors are bracing for potential volatility after the most dramatic escalation in the Middle East in decades. Over the weekend, the US and Israel conducted their largest coordinated strike on Iran to date, killing Ayatollah Ali Khamenei – the country’s long serving Supreme Leader. The operation followed the breakdown of negotiations around Iran’s nuclear programme, with President Trump calling the strike essential to ending Tehran’s nuclear ambitions.

Tehran retaliated within hours, launching an unprecedented wave of attacks across the region. Explosions were reported in Saudi Arabia, Qatar, Bahrain, Jordan and the UAE, and drone strikes caused significant disturbance and injuries at airports in both Dubai and Abu Dhabi. Airspace closures have already led to more than 3,000 flight cancellations, with further disruption expected in the days ahead.

The potential human cost of a widening conflict is deeply concerning, and the prospects for a straightforward diplomatic resolution appear remote. Early market indicators point clearly towards safe haven positioning, with gold moving back toward record highs. We expect the US dollar and US Treasuries to strengthen, while risk assets may remain under pressure. Despite OPEC (a group of major oil-producing countries that work together to control how much oil they produce and help influence global prices) assurances that supply will be increased, any threat to activity in the Strait of Hormuz is likely to keep upward pressure on oil prices.

United States: AI concerns and tariffs weigh on sentiment

US equities endured a volatile week as investors continued to grapple with uncertainty around the long term impact of AI, a tense geopolitical backdrop and a shifting trade environment.

A widely circulated research note early in the week reignited fears that rapid advances in AI could disrupt labour markets, erode traditional corporate moats and compress margins across several industries. Software names remained particularly fragile, with many previously defensive companies experiencing drawdowns of up to 50% over recent months. Sentiment improved somewhat following stronger than expected results from Salesforce and Snowflake, though debate among investors remains highly polarised. Some see a rare buying opportunity in high quality compounders, while others argue that their historical advantages have been permanently weakened. Our view lies somewhere in the middle, though we believe caution remains prudent at this early stage of the AI adoption cycle.

Trade policy was again in focus. Following the US Supreme Court’s ruling last week, the administration confirmed that tariffs on some countries would rise from 10% to 15%, with potential for broader global measures under the 1974 Trade Act. US–Europe tensions resurfaced, though we expect these developments to be overshadowed in the near term by events in the Middle East.

Economic data offered a mixed picture. Producer price inflation accelerated sharply, registering its largest monthly increase since mid 2025, while factory orders fell 0.7%, reversing the prior month’s strength. Consumer confidence ticked higher but remains well below its 2024 peak. Jobless claims were broadly steady, pointing to a labour market that is cooling gradually rather than deteriorating sharply.

Safe haven demand pushed Treasury yields lower, with the 10 year falling below 4% for the first time since November. Earnings season has remained robust, with nearly three quarters of S&P 500 companies beating expectations and revenue growth running above 9% year on year.

International: Europe supported by earnings, Asia navigates shifting policy landscapes

Europe once again outperformed US markets this week, with UK and European indices reaching new highs as investors rotated away from US mega cap technology. Strong corporate earnings helped offset geopolitical uncertainty. German business confidence continued to improve, while French sentiment softened slightly. Inflation readings across the continent were mixed but remain broadly aligned with the European Central Bank’s path toward lower rates. In the UK, expectations for additional rate cuts later in the year provided further support to domestic equities.

Japanese markets reached new record highs, supported by optimism around the fiscal and monetary outlook under Prime Minister Takaichi. The yen weakened further as two perceived dovish nominees were put forward for the Bank of Japan’s Policy Board. Tokyo core Consumer Price Index (CPI) rose modestly above expectations, lending cautious support to a gradual tightening path.

In China, markets advanced during a shortened post holiday week. Travel activity surged during Lunar New Year, though per trip spending remained subdued, signalling ongoing consumer caution. Shanghai continued to loosen property market restrictions, and the central bank moved to temper yuan appreciation by cutting foreign exchange forward reserve requirements to zero.

---

The week ahead

Monday: Impact of Middle East developments on global markets

Markets will absorb the first full day of trading following the weekend’s dramatic escalation. Oil, gold, the US dollar and Asian currencies will be key indicators of risk sentiment.

US PMI data (Manufacturing Monday; Services Wednesday)

Purchasing Managers Index (PMI) is an economic indicator that shows the health of a countries manufacturing or service sector. Both readings are expected to remain firm, supporting the broader narrative of economic resilience.

US Initial Jobless Claims (Thursday) and Nonfarm Payrolls (Friday)

Consensus expectations point to broadly stable jobless claims and a softening in payroll growth.

Eurozone CPI (Tuesday)

Investors will look for further evidence that disinflation is holding despite energy related risks; consensus is for a flat reading of 1.7%.

---

Your weekly market review was powered by Canaccord Wealth

---

Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity. Where investment is made in currencies other than the investor’s base currency, the value of those investments, and any income from them, will be affected by movements in exchange rates. This effect may be unfavourable as well as favourable. Past performance and future forecasts figures are not a reliable indicator of future results.