Markets mixed as yields ease and oil volatility persists

Market Commentary

The yield on the US 10-year Treasury note fell to around 4.32% this morning (Tuesday, 31 March), declining for a second consecutive session amid dovish signals from Federal Reserve Chair Jerome Powell. He noted that long-term US inflation expectations remain in check despite heightened uncertainties from the Middle East and that the central bank’s policy stance allows officials to assess the impact of the Iran war, while tending to look through supply shocks. Treasury yields were further pressured by concerns over the economic fallout from the conflict, even as investors await March’s consumer confidence index and February’s JOLTS job openings data for further guidance.

US equity futures rose nearly 1% the same day following reports that Donald Trump indicated a willingness to end the US military campaign against Iran even if the Strait of Hormuz remains largely closed. Markets also continued to digest Powell’s comments on anchored inflation expectations. In regular trading on Monday, the Dow rose 0.11%, while the S&P 500 and Nasdaq Composite declined 0.39% and 0.73%, respectively, with the S&P 500 down 9.40% from its January peak and the Dow and Nasdaq off 10.50% and 13.40%. Investors remain focused on upcoming US data releases.

UK shop price inflation rose 1.20% year-on-year (y/y) in March 2026, up from 1.10% in February but below expectations of 1.30%, as the effects of the Middle East conflict began to feed through to prices. Food inflation eased to 3.40% from 3.50%, while non-food inflation remained steady at 0.10% following a 0.10% decline. Experts noted that higher costs linked to the conflict are beginning to impact supply chains, with retailers working to mitigate price pressures.

European equities closed higher on Monday, supported by lower sovereign yields. The STOXX 50 rose 0.30% to 5 526, while the STOXX 600 gained 0.80% to 580. Oil prices held near their highest levels since 2022 amid ongoing tensions, including threats to exports from the Red Sea and potential action against Iranian oil infrastructure. Insurers including Munich Re, AXA and Allianz gained between 1% and 3%, while utilities such as Iberdrola and Enel also advanced.

Germany’s DAX 40 rose around 1.20% to close at 22 563, ending a two-day losing streak. US Treasury Secretary Scott Bessent confirmed plans to reopen the Strait of Hormuz with military or multinational support, while G7 ministers pledged to safeguard energy markets. German inflation accelerated to 2.70% in March 2026 from 1.90% in February. Among individual stocks, SAP, RWE, Vonovia and Scout24 gained between 3.20% and 4.10%, while Siemens Energy and Commerzbank declined 1.70% and 1.40%.

China’s 10-year government bond yield fell to around 1.80% this morning, its lowest in nearly a month, as PMI data pointed to stronger activity. The composite PMI rose to 50.5 in March 2026, a three-month high, with the manufacturing PMI at 50.4 and the non-manufacturing PMI at 50.1. Equity markets followed, with the Shanghai Composite rising 0.50% to 3 941 and the Shenzhen Component gaining 0.40% to 13 769, supported by the data and broader resilience despite ongoing geopolitical tensions. Notable gainers included PetroChina, Industrial and Commercial Bank of China, BYD and Midea Group.

The South African rand weakened to around R17.10 per US dollar, its lowest level since late November, amid a stronger dollar and higher oil prices linked to Middle East tensions. The South African Reserve Bank kept interest rates unchanged at 6.75% while signalling the potential for increases should inflation risks rise. The currency is on track for a near 8% decline in March.

Commodity markets remained volatile. WTI crude retreated to around $103 per barrel after earlier gains, following reports that Trump may end the US military campaign despite ongoing disruption risks in key shipping routes. Brent remained elevated amid continued threats to energy flows. Gold rose towards $4 600 per ounce, though it remains on track for a decline of around 13% in March, while silver traded above $72 per ounce but is set for a monthly drop of more than 20%.