Equity indices, currencies, commodities, bond markets.
French growth was lower than expected in the first quarter, at 0% QoQ, mainly hampered by exceptional factors, mostly aeronautics deliveries and public investment. These factors explain why this figure is significantly lower than our nowcast and that of the Banque de France, which estimated that growth had reached 0.3% in Q1, based on production indicators in industry and services. This lead taken by production is reflected in a strongly positive contribution from changes in inventories (+0.8 percentage points), driven mainly by transport equipment.
The central banks of the world’s leading advanced economies met this week, and all decided to leave their policy rates unchanged despite significantly higher inflation prints and outlooks. In the words of Bank of England (BoE) Governor Andrew Bailey, these were “active holds”. They are not fully hawkish yet, but the hawks have made their dissent heard while still in the minority. But they are no longer in a pure passive “wait-and-see” mode. We expect hikes to come through in June, at least for the BoE, BoJ and ECB.
Equity indices, Currencies & commodities, and Bond markets.
Economic and financial forecasts for major economies as of April 2026.
Following a prolonged period of low interest rates (2015-2020), the inflationary shock of 2021-2023 caused interest rates to rise sharply across the Eurozone, including France. This rate shock, the scale and speed of which had not been seen since the early 1990s, made borrowing more expensive, curbed investment in housing, and altered the relative returns among deposits, regulated savings accounts, life insurance and market investments.
Despite the war and energy shocks unfolding in parallel to the Meetings, finance officials, central bankers and other delegates took the situation with a poise that contrasted with the sense of shock that followed Liberation Day. Unable to predict with any degree of confidence how the war would evolve, and hence how large the economic damage would be, delegates focused more than usual on what lies beyond the near-term outlook: regime changes in geopolitics, economics and markets; how to explain and preserve recent resilience; and the multiple ongoing re-wirings of the fabric of the global economy and financial markets. Here are some personal key takeaways.
This week, Washington DC will host two gatherings that should be important in their own right, and yet are unlikely to be: one is the Spring Meetings of the International Monetary Fund (IMF) and World Bank (WB), which brings into town thousands of top finance and central banking officials as well as private sector delegates from the financial sector and civil society; the other is the peace negotiations between Israel and Lebanon. The former is traditionally an opportunity to take stock and send a combination of reassuring messages to markets and stern admonitions to policymakers. The latter could have been history-making just for taking place. Yet both are certain to be overshadowed by developments in the Persian Gulf and US-Iran talks
Will the same causes produce the same effects? In other words, will the outbreak of war in Iran and the associated surge in oil prices (+44% to date) and gas prices (+64%) lead to an inflationary shock comparable to that of 2022? Will their negative effects on growth be the same as those of the war in Ukraine and the ensuing energy shock (a rise in oil prices of around 30% between 23 February and its peak in early June 2022, and a rise in gas prices of around 210% between 23 February and the peak in late August 2022)? The risk cannot be ruled out. Indeed, there are similarities and numerous uncertainties.
Asset prices have been moving in unusual ways since the onset of the Gulf War (no safe havens, limited dollar rally and de-risking). Do financial markets know something we don’t, has something fundamentally changed in the way asset prices reflect economic expectations, or are they simply malfunctioning and about to swing wildly as things normalise? Unfortunately, it is impossible to know for sure, and what’s more, these hypotheses are not mutually exclusive. So far, markets appear to expect an inflation spike, met with a firm central response, with limited damage to growth, and a relatively swift return of inflation to target range. That may turn out to be correct. But far worse outcomes are also very plausible
For several years, Central Europe has been facing a marked demographic decline. Its magnitude varies from one country to another. The total population decline from 2004 to 2025 ranges from -0.3% in Slovakia to -17.2% in Bulgaria. The Czech Republic is the only country in the region to have seen a population increase over the same period. The working-age population (ages 15–64) is also declining. However, the situation is less unfavourable in Hungary, Poland, the Czech Republic and Slovakia, while Romania and Bulgaria are experiencing a more significant decline due to migration patterns. Net migration flows were negative for Bulgaria until 2019 and for Romania until 2021. However, this trend has reversed in recent years
As in 2022, the energy shock will affect emerging and developing economies. Today, as in the past, this shock is a negative-sum game between importing and exporting countries. Furthermore, although this is basically a supply shock, central banks in emerging economies may tighten their policies if they need to counter downward pressure on exchange rates, in order to prevent inflation from rising too sharply. However, compared to 2022, there are mitigating factors: 1/ the absence of a shock to agricultural commodity prices so far; 2/ AI, which is an external growth driver for Asian countries in particular; and 3/ the Fed is expected to adopt a more accommodative stance than in 2022 in response to the anticipated rise in inflation
Key indicators for emerging countries: Real GDP, inflation, credit, public debt.
With the rise of artificial intelligence (AI), emerging countries with strategic resources—such as critical metals and semiconductor production capacities—are becoming key players. Countries that are well positioned within AI supply chains benefit from both an economic growth engine and an asset to leverage in their international relations. Industrialised countries in Asia, which account for over 85% of the global export of electronic chips, are best placed to capitalise on the increasing demand for AI. However, this advantage comes with greater exposure to the risk of a technology market correction
