Global Economy Briefing — March 25, 2026

The Big Three

Economic Dashboard

Europe

Flash PMIs ring the stagflation alarm bell

The Eurozone flash manufacturing PMI surged to 51.4 in March from 50.8, crushing the consensus expectation of 49.5 and marking the strongest factory expansion in 45 months. But HCOB chief economist Cyrus de la Rubia warned the headline is deeply misleading: firms are panic-buying materials ahead of further supply chain disruption from the Iran war, not responding to genuine end-demand. Output expectations were revised down sharply — the largest monthly decline since Russia’s invasion of Ukraine in 2022.

The services sector told the true demand story. The Eurozone services PMI slumped to 50.1, missing the 51.1 consensus and falling from 51.9 in February — the weakest expansion since the current recovery began last September. New orders fell for the first time in eight months. France was hit hardest, with services contracting to 48.3 against 49.0 expected, dragged down by political uncertainty and energy-driven cost pressures. Input prices across both sectors rose at the fastest pace since February 2023.

Germany’s manufacturing PMI jumped to 51.7, obliterating the 49.5 forecast, driven by war-related defence procurement and firms front-loading purchases to hedge against supply disruption. But even here, HCOB noted the surge “will likely be short-lived” as output expectations deteriorated sharply. Supplier delivery times lengthened to their greatest extent in over three-and-a-half years — a classic supply-shock signature that mechanically inflates the PMI but signals dysfunction rather than health.

European equities turned lower after the initial PMI-driven bounce faded, as investors digested the stagflationary implications. The STOXX 600 gave back Monday’s gains. Poste Italiane dropped more than 5% after its €10.8 billion bid for Telecom Italia dominated Italian corporate news, while Salesforce led Dow losers with a 6.2% decline on AI disruption fears. ECB Chief Economist Philip Lane and Bundesbank President Nagel were both scheduled to speak, with markets watching for any policy signal following the PMI’s stagflation warning.

United States

Monday’s relief rally fades as oil resumes climb

Wall Street gave back Monday’s ceasefire-driven gains as the geopolitical reality reasserted itself. The S&P 500 fell 0.37% to 6,556.37, the Nasdaq dropped 0.84% to 21,761.89, and the Dow shed 84 points to 46,124.06. The “Magnificent Seven” tech stocks continued their 2026 slump, with Salesforce declining 6.2%, Microsoft falling 2.7%, and IBM losing 3.1% as AI disruption fears weighed on enterprise software names.

Oil’s reversal higher was the primary catalyst for the selloff. Brent climbed back above $103 and WTI surged roughly 5% to $92.40 as Iran’s denial of direct talks with Washington and Israel’s resumption of strikes across Tehran punctured the ceasefire narrative. Bloomberg reported that Iran has begun charging commercial vessels up to $2 million per transit through the Strait of Hormuz — an informal toll that signals Tehran’s tightening grip on the chokepoint even during the five-day strike pause.

The VIX rose 3% to 26.95, erasing Monday’s de-escalation relief. Treasury yields dipped slightly, with the 10-year easing to 4.35% as bond buyers returned on recession fears. US flash PMI data and the Richmond Fed manufacturing index were due later in the session, along with Q4 nonfarm productivity and unit labor cost revisions. Construction spending for January unexpectedly declined, adding to evidence that the housing and building sectors are buckling under high rates.

In private credit, Apollo Global Management’s $15 billion fund was hit with redemption requests totalling 11.2% of shares — more than double its 5% quarterly limit — and will distribute just 45 cents on the dollar to investors seeking to exit. Apollo shares fell over 3% and are down nearly 24% in 2026. Separately, stablecoin issuer Circle plunged 19% — its worst day ever — after the draft Clarity Act threatened to limit yield on stablecoin balances, dragging Coinbase down 9% in sympathy.

Asia-Pacific

Japan CPI eases below target; Nikkei bounces on ceasefire hopes

Japan’s national CPI for February confirmed at 1.3% year-on-year — the lowest since March 2022 and well below the Bank of Japan’s 2% target. Core CPI also eased, reducing near-term pressure for a BoJ rate hike. The Nikkei 225 rose 1.1% on Tuesday’s open as the ceasefire hopes from Monday filtered through, with insurers leading gains after Berkshire Hathaway increased its stake in Tokio Marine, which surged 17%.

Australia’s manufacturing PMI held steady at 50.1 in March, signalling virtually no change from February. The RBA’s policy deliberations are complicated by the energy shock: while domestic inflation has been easing, imported price pressures from oil threaten to reverse the trend. February CPI data due Tuesday night Australian time will be critical in shaping expectations for the May board meeting.

South Korea’s Kospi surged over 3% before paring gains to add 1.5% on the ceasefire momentum, while Hong Kong’s Hang Seng advanced 1.6% and China’s CSI 300 rose 0.5%. The BoJ released its monetary policy meeting minutes from the March decision, reiterating the “recovering moderately” assessment while flagging energy disruption risks. Japan’s March flash PMI data was expected near 52.9 for manufacturing, broadly in line with the prior month.

India’s flash composite PMI for March was due Tuesday, with the prior reading at a strong 58.9. The Reserve Bank of India continues to intervene aggressively to defend the rupee, drawing down reserves by $7 billion in the latest week alone. For the broader region, the key question remains unchanged: can Brent sustain below $100, or will Tuesday’s reversal back above $103 prove that Monday’s crash was a dead-cat bounce driven by headline diplomacy rather than substance.

Latin America & Africa

Copom minutes land; Mexico inflation data due

Brazil’s Copom released the minutes from its March meeting, which delivered the widely expected 25-basis-point cut to 14.75%. The document reinforced the hawkish tone of the accompanying statement, emphasising that the war in Iran represents a “significant upside risk to inflation projections” and that future decisions would be data-dependent. The committee highlighted that Brent above $100 would trigger fuel-price pass-through that could push IPCA above the 4.5% ceiling.

The BCB Focus Market Readout, released Monday, showed inflation expectations for 2026 ticking higher — a warning sign for new Finance Minister Dario Durigan, who is trying to preserve the Copom’s easing credibility while managing the oil shock’s fiscal costs. With Brent reversing back above $103 on Tuesday, the carry trade that had supported the real comes under renewed pressure. The government’s 12% crude export tax generates less revenue as domestic production is consumed rather than exported at elevated prices.

Mexico’s first-half March CPI and January economic activity data were due Tuesday, offering the first comprehensive read on how the economy is absorbing the energy shock. After the blowout Q4 aggregate demand print of 4.5% year-on-year reported last week, a strong activity reading would complicate Banxico’s easing narrative and support the peso’s carry-trade appeal. The prior month’s retail sales growth of 4.3% year-on-year sets a high bar.

In South Africa, gold’s Tuesday bounce to $4,405 provided a tentative reprieve for mining stocks after a devastating week. The rand steadied as the dollar held flat. For the broader Latin American commodity complex, the PMI data presented a paradox: European manufacturing’s war-driven surge benefits commodity suppliers in the near term, but the services collapse signals weakening end-demand that will eventually catch up to the order cycle. The Eurozone trade deficit reported last week shows the import bill is already unsustainable.

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