The third week of March 2024 was a relatively uneventful one for global markets, despite some surprising inflation data. 

Most markets, including Europe, emerging markets, the Nasdaq, and the S&P 500, were flat for the week before falling again in the last US trading session. The notable exceptions were Japanese markets, which lagged slightly, and U.S. small caps and Australian markets, which were negatively impacted by falling iron ore prices and banks were weighed down  slightly rising interest rate expectations.

The main focus of the week was the higher-than-expected inflation data. The Personal Consumption Expenditures (PCE) index, which the Fed watches closely, was surprisingly strong two weeks ago. The February Consumer Price Index (CPI) print also came in higher than anticipated. The core measure of inflation has been creeping up over the last few months, raising concerns about whether the disinflationary trend is running out of steam. However, the market has largely interpreted this as noise for the moment, awaiting more data points.

Bond markets reacted more strongly to the inflation news than equity markets, with U.S. rates rising by nearly 20 basis points and Australian rates following suit. The 10-year rates, which are closely watched by markets, have been trading within a 20 basis point range so far this year, with the upper end of the range being tested recently.

Commodity markets were mostly flat, with iron ore being the biggest faller. There has been some scepticism around China's fiscal stimulus efforts, and the rising oil prices are seen as more related to geopolitics rather than a global economic problem.

The market is still pricing in an easing cycle for short-term rates this year, with the main question being whether rate cuts will begin in June or August. However, expectations of growth seem to be declining, while expected inflation is creeping up, resulting in a stagflationary feeling in markets last week.