• Market Round Up: Global equity markets stayed cautious as a jump in oil prices pressured both equities and bonds, while Federal Reserve Chair Jerome Powell warned that rising energy costs are likely to add to inflation. Market sentiment deteriorated further as renewed strikes between Iran and Israel targeted key energy infrastructure in the Middle East, complicating US efforts to stabilise financial conditions.The FOMC voted 11-1 to keep the federal funds rate unchanged, with Powell stressing that policymakers will need clearer evidence of easing inflation pressures before resuming rate cuts. The S&P 500 fell 1.4%, the Nasdaq declined 1.5%, and the Eurostoxx 600 also slipped 0.8%. In corporate news, Micron Technology, the largest U.S. producer of computer memory chips, issued an upbeat outlook for the current quarter as sharply rising chip prices improved its earnings prospects. On the macro front, US PPI came in hot, with headline and core prints beating expectations across the board, raising concerns over persistent inflation pressures. Mortgage applications fell sharply, reflecting ongoing pressure in the housing sector. In Europe, Core inflation stayed at 2.4% in February and services inflation was also unchanged at 3.4%, underscoring the ongoing stickiness in services inflation, a key concern for the ECB as it considers its next policy steps.
• Day Ahead and Market Drivers: Asian markets are under pressure this morning, with Japan dropping 2.9%, Hong Kong sliding 1.9%, and China declining 1.6%. On the macro front today, Initial Jobless Claims are expected to edge higher, while the Leading Index is forecast to show a slight improvement but remain in negative territory. New Home Sales (MoM) are projected to fall by 2.7%.
• Stocks in focus: Grafton Group (Overweight PT £12.05 +32% Upside) - Acquisition of Spanish HVAC distributor Mercaluz.
• Bonds: Yields moved higher across major sovereign markets, with the US 10-year rising seven basis points to 4.27%. Germany’s 10-year increased three basis points to 2.94%, while the UK 10-year gained four basis points to 4.74%. In the US curve, the 2-year yield climbed 10 basis points to 3.77% and the 30-year advanced four basis points to 4.88%. The ECB is expected to keep interest rates unchanged at today’s meeting. Market attention will centre on President Lagarde’s tone, the updated inflation outlook, any guidance on whether the possibility of future rate hikes may re-emerge.
• Commodities: Brent crude is up 5.5% this morning to $113 a barrel, while spot gold has fallen 2.7% to $4,763 an ounce. The Bloomberg Dollar Spot Index gained 0.5% yesterday. The euro declined 0.6% yesterday and is currently up 0.1% this morning. European natural gas prices rocketed up 35% this morning after an Iranian attack last night damaged the world's largest liquefied natural gas export plant. 

Opportunities this week:

• Last week was a busy week for PayPal with multiple announcements regarding its stablecoin (PYUSD), Venmo, and new strategic partnerships, which we believe continue to position PayPal to capture growth in the ever-evolving FinTech space, hence we reiterate our Overweight rating and a revised PT $97 from $96.   
• Following a multi-year period of de-rating and under-performance we are upgrading our rating on Diageo to Overweight and revising our price target from 2260p to 2370p, which provides c. 29% potential upside before the c.4% dividend yield. 
• After a period of share price weakness for Rio Tinto related to weaker iron ore prices, we are reiterating our Overweight rating with a PT of 5590p (c. 30% upside plus 7% dividend yield).