Global Equity Market Review: Macroeconomic Divergence and Geopolitical Volatility for the Week Ending 27 February 2026

The final week of February 2026 was a period of profound recalibration for global financial markets, as the initial euphoria surrounding corporate earnings collided with the sober reality of persistent inflation and heightened geopolitical instability. Equity indexes across the globe exhibited a stark divergence in performance, reflecting a fragmented global economy where domestic policy pivots and regional conflicts began to override broader thematic trends like the artificial intelligence boom.¹ While the United Kingdom and Australia saw their primary benchmarks scale historic record highs, Wall Street and the Indian sub-continent faced significant downward pressure as investors shifted toward a “risk-off” defensive posture.⁴ Central to the week’s narrative was the dual challenge of a “hotter-than-expected” inflation print in the United States and the breakdown of high-stakes nuclear negotiations in Geneva between the United States and Iran, which sent tremors through the energy and aviation sectors.¹

The prevailing sentiment in the market was one of cautious reassessment. The technology sector, which has spearheaded gains for the better part of the decade, entered a period of turbulence as the “AI-scare trade” gained momentum. This was despite a quarterly performance from the industry’s bellwether, Nvidia, that exceeded even the most bullish analyst projections.¹ Market participants increasingly focused on the sustainability of massive capital expenditures and the potential for disruptive impacts on traditional software and services.¹ Concurrently, the central banking landscape saw fresh hawkishness from the Federal Reserve and the Reserve Bank of Australia, contrasted by a significant dovish pivot in Japan following high-profile nominations to the Bank of Japan’s policy board.¹

United States: The AI Paradox and Inflationary Headwinds

The American equity markets endured a bruising week as the triumvirate of stubborn inflation, hawkish central bank rhetoric, and a paradoxical reaction to stellar technology earnings dragged major indexes lower. The week was punctuated by the release of January’s Producer Price Index (PPI), which surged by 0.8%, far exceeding the 0.3% increase anticipated by economists.⁴ This data point served as a catalyst for a broader sell-off, as it suggested that the path toward the Federal Reserve’s 2% inflation target remains fraught with difficulty, potentially delaying the interest rate cuts that investors had aggressively priced into the market for early 2026.⁷

Benchmark Performance and Sectoral Shifts

The performance of the primary benchmarks reflected a clear rotation away from growth-oriented tech and toward value and defensive sectors. While the Dow Jones Industrial Average managed to eke out marginal gains during certain sessions, it ultimately closed the week lower, tracking the broader malaise in the S&P 500 and the tech-heavy Nasdaq Composite.¹

The S&P 500 finished February down 1.43%, marking its worst monthly performance in nearly a year.⁷ Sectoral performance indicated a flight to safety, with basic materials, consumer defensive, and utilities emerging as the top gainers, while information technology and communication services fell out of favour.¹ The “fear gauge”—the CBOE Volatility Index—spiked as investors grappled with the implications of the PPI data and escalating tensions in the Middle East.⁷

The Nvidia Conundrum and the “AI-Scare Trade”

The most significant development in the technology sector was the market’s reaction to Nvidia’s fiscal fourth-quarter results. The company reported what analysts termed a “blowout” beat-and-raise performance, yet its shares were sold off heavily following the announcement.¹ This phenomenon highlighted the emergence of the “AI-scare trade,” where investors are no longer content with strong current earnings but are increasingly wary of the hundreds of billions of dollars being poured into capital expenditure.¹ Concerns regarding “circular funding”—where AI firms effectively fund their customers to buy their own products—and the risk of AI-driven disruption to the software industry led to a broadening of leadership away from the mega-cap tech giants.¹

However, the tech sector was not without its bright spots. Dell Technologies saw its shares soar by 21.93% after issuing a robust growth forecast that resonated with investors seeking tangible evidence of AI-related hardware demand.⁷ Conversely, firms with high valuations and sensitive billings, such as Zscaler and Ambarella, saw sharp declines despite beating analyst expectations, as the market prioritised forward-looking billings over historical earnings.⁷

Corporate Strategy and Consolidation

The week also saw significant movement in the media and payments sectors. Block Inc. (formerly Square) announced plans to lay off roughly 4,000 employees—approximately 40% of its workforce—in a pivot toward labour-saving artificial intelligence. This move was initially cheered by the market, with the stock jumping sharply as investors rewarded the aggressive cost-cutting and AI integration strategy.⁷ In the media space, the bidding war for Warner Bros. Discovery appeared to reach a conclusion, with Paramount Skydance agreeing to a deal worth approximately $110 billion to acquire the Hollywood brand, a move that signals continued consolidation in the streaming and entertainment industries.⁷

Monetary Policy and Macroeconomic Indicators

The Federal Reserve’s future policy path was complicated by hawkish commentary from Governor Christopher Waller. Despite being known as a dove who dissented in January, Waller suggested that the strength of the January labour market and the persistence of inflation might make it appropriate to hold the policy rate at current levels for longer than anticipated.¹ This sentiment was echoed by Morgan Stanley economists, who raised their forecasts for the core Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge.¹

Labour Department data showed that initial jobless claims rose slightly to 212,000, while continuing claims fell marginally. While the labour market remains historically strong, the combination of high employment and hot wholesale prices suggests that the “last mile” of inflation reduction will be the most difficult for the central bank to navigate.¹⁰

Europe: Record Highs in London Amid Continental Divergence

European markets experienced a week of significant volatility and geographic divergence. While the United Kingdom’s FTSE 100 reached new record heights, continental markets in Paris and Frankfurt were more tempered, influenced by a mixture of cooling inflation in Germany and rising tensions that pressured the travel and aviation sectors.⁴

The UK’s “Bumper” Record Run

London’s blue-chip index, the FTSE 100, concluded a record-breaking week at a new all-time high of 10,910.55 points.⁴ The index’s performance was bolstered by its heavy exposure to energy and mining stocks, which acted as a natural hedge against rising oil prices and geopolitical uncertainty.⁴ Analysts noted that 2026 is shaping up to be a strong year for UK stocks as global investors rediscover value in the London market.⁴

The energy giants Shell and BP saw gains as Brent crude oil climbed toward $72 per barrel due to the escalation of the crisis between the United States and Iran.⁴ However, this same geopolitical tension proved detrimental to the aviation sector. IAG, the owner of British Airways, saw its shares plummet by 7.4% despite reporting strong annual results, as investors feared that rising fuel costs and potential military action would dampen international travel demand.⁴

Continental Inflation and Monetary Policy

In Germany, inflation data provided a mixed signal for the European Central Bank (ECB). The national inflation rate slowed to 2.0% in February, meeting the ECB’s target.¹⁵ While this provided some optimism for eventual rate cuts, the statistics office, Destatis, warned that the German economy is only recovering slowly, with sluggish growth dampening the broader Eurozone outlook.¹⁶

In France, the CAC 40 was more volatile, influenced by a rebound in consumer price growth from pandemic lows.¹⁶ The ECB’s latest consumer survey indicated that households remain pessimistic about the economy, with growth expectations for the next 12 months sitting at -1.1%.¹⁷ Despite this, income growth expectations ticked up slightly, suggesting some resilience among higher-income quintiles.¹⁷

The EUREP Facility and Financial Stability

A significant developments during the week was the announcement that the ECB Council plans to expand its “Eurosystem Repo Facility for Central Banks” (EUREP) from July 2026.¹⁹ This move is intended to provide euros to central banks worldwide, effectively challenging the US dollar’s status as the global reserve currency. While the ECB hopes this will increase demand for the euro, critics warned that it could lead to higher long-term inflation and encourage reckless borrowing by over-indebted Eurozone governments.¹⁹

Asia: The Takaichi Trade and Semiconductor Dominance

The Asian markets were dominated by policy shifts in Japan and the ripple effects of the American technology sell-off. Japan’s Nikkei 225 surged to historic intraday highs, driven by what traders have termed the “Takaichi trade,” while markets in China and South Korea grappled with shifting investor sentiment and geopolitical concerns.²⁰

Japan’s Historic Record and Dovish Pivot

The Nikkei 225 surged to 59,000 points for the first time in history before paring gains to close at 58,753.39.²⁰ This rally was triggered by Prime Minister Sanae Takaichi’s nomination of two pro-stimulus, “reflationist” academics to the Bank of Japan’s policy board: Ayano Sato and Toichiro Asada.⁸ These appointments suggest that the Takaichi administration intends to prioritise economic growth over aggressive interest rate hikes, a move that weakened the yen and bolstered the competitiveness of Japanese exporters.⁸

The “Takaichi trade” also impacted the bond market, with long-term yields rising in anticipation of continued stimulus and its long-term effects on inflation.⁸ Despite this, the shorter-dated bond yields fell as the market bet that the central bank would not hurry to raise rates in the near term.²⁴

China: Anticipation of the “Two Sessions”

In China, the Shanghai Composite Index traded in a narrow range, closing the week slightly higher as investors awaited the annual parliamentary “Two Sessions” meeting scheduled for early March.²⁵ Policymakers are expected to outline the 15th Five-Year Plan (2026–2030), with a focus on technological innovation, social welfare, and sustainable growth.²⁵ While onshore sentiment improved following the holiday period, technology shares remained volatile, tracking their US counterparts lower following the mixed reaction to Nvidia’s earnings.²⁵

The Hang Seng Index in Hong Kong saw a 0.95% jump on Friday, reversing earlier losses. However, the index remains pressured by capital outflows and fears of AI-driven disruption to its local technology sector.²⁵ Analysts noted that low valuations are beginning to attract some “reflation trade” interest in consumer staples such as dairy and distilled liquor (baijiu).²⁶

South Korea and Southeast Asian Performance

South Korea’s KOSPI led the region in gains earlier in the week, driven by optimism over AI-related memory demand for data centres.²⁰ However, the index lost 1% on Friday as traders engaged in profit-taking following the technology retreat on Wall Street.¹³ Singapore’s Straits Times index also hit record highs during the month, closing with a 1.6% monthly gain as the city-state continues to benefit from its status as a regional financial hub.²⁸

India: Geopolitical Risk-Off and Foreign Outflows

The Indian equity markets faced significant downward pressure during the final week of February, with benchmark indices tumbling over 1% on the Friday close. The decline was largely driven by a massive sell-off from Foreign Institutional Investors (FIIs) and mounting concerns over the escalation of tensions in the Middle East.⁵

Benchmark Plunge and FII Sentiment

The 30-share BSE Sensex tanked 961.42 points to settle at 81,287.19, while the 50-share NSE Nifty tumbled 317.90 points to close at 25,178.65.⁵ The market’s “risk-off” tone was exacerbated by the lack of progress in nuclear talks between the United States and Iran in Geneva, which intensified fears of a broader conflict that could disrupt global oil supplies.⁵

Exchange data showed that FIIs offloaded equities worth ₹3,465.99 crore in a single session, while Domestic Institutional Investors (DIIs) attempted to provide support by purchasing ₹5,031.57 crore worth of stocks.⁵ Despite this domestic support, the absence of fresh domestic triggers and the winding down of the earnings season left the market vulnerable to global macro shocks.⁵

Sectoral Performance and Economic Growth

The sell-off was broad-based, with automobile, FMCG, and pharmaceutical stocks bearing the brunt of the profit-booking.⁵ Major laggards included Sun Pharma, Bharti Airtel, and Maruti Suzuki, while IT stocks like HCL Tech and Infosys managed to post gains, acting as a partial hedge for the broader market.³⁰

Despite the market volatility, India’s macroeconomic fundamentals remained robust. Government data revealed that the Indian economy grew by 7.8% in the third quarter of fiscal year 2026.⁵ Furthermore, the growth rate for the July-September 2025 period was revised upward to 8.4%, although a new GDP series simultaneously lowered the overall estimated size of the economy.⁵

Commodities and the Rupee

The Indian Rupee weakened slightly, settling at 90.99 against the US dollar.⁵ Gold futures saw an increase in demand as a safe-haven asset, while silver prices also headed for monthly gains.³² Brent crude, the global oil benchmark, jumped 1.26% to $71.64 per barrel, a level that remains a concern for the Indian economy as it enters the final leg of the 2026 Budget session.⁵

Oceania: Record Highs and Monetary Tightening

The Australian and New Zealand stock markets demonstrated remarkable strength, with the S&P/ASX 200 scaling new record highs even as the Reserve Bank of Australia (RBA) raised interest rates to combat stubborn inflation.⁶

Australia: A Month of Records

The S&P/ASX 200 rose 0.3% to close at 9,199 on Friday, marking its third consecutive record-high close.⁶ For the month of February, the index climbed 3.7%, its strongest February performance since 2019.⁶ The rally was driven primarily by the mining sector, which benefited from rising gold prices and strong earnings from base and critical minerals companies.⁶

Mining giants BHP Group and Rio Tinto saw steady gains, supported by firmer copper prices and a rotation of funds into the sector.⁶ Technology shares were also volatile; while Block Inc.’s Australian-listed shares surged nearly 28%, WiseTech Global faced scrutiny over plans to cut 2,000 jobs as part of an AI-driven restructuring.⁶ Conversely, the consumer staples sector underperformed, with Coles Group slumping 7.4% due to weaker half-year profits and intensifying competition.⁶

New Zealand: Reaching a Six-Week Peak

In New Zealand, the NZX 50 rose 0.4% to close at 13,723, reversing early morning weakness. This marked the index’s highest finish in six weeks, driven by strength in logistics and retail trade.³⁴ The New Zealand market has been supported by indications that the Reserve Bank will maintain a dovish stance amid a manageable inflation outlook and improving economic output.³⁴

RBA Policy and Inflationary Pressure

The Reserve Bank of Australia (RBA) raised the cash rate to 3.85% in February, citing a material revision in the inflation outlook.⁹ Underlying inflation is expected to peak at 3.7% in mid-2026, driven by unexpectedly strong private demand and capacity constraints within the economy.¹⁰ RBA Governor Michele Bullock noted that while household spending remains resilient, the “last mile” of bringing inflation back to the 2-3% target range will require a restrictive policy stance for longer than previously anticipated.⁹

Despite the rate hike, Australian investors appeared to “shrug off” the tightening, focusing instead on robust corporate results and the record-breaking performance of the mining sector.⁶

Conclusion

The final week of February 2026 highlighted a global financial system in a state of flux. The artificial intelligence narrative, while still potent, has entered a more critical phase where investors are demanding tangible evidence of labour-saving efficiency and revenue growth to justify lofty valuations. At the same time, the divergence in central bank policies—from the dovish nominations in Japan to the hawkish rate hikes in Australia and the United States—has created a complex environment for currency and equity markets.

Geopolitics has once again emerged as a primary driver of market sentiment, with the breakdown of US-Iran negotiations and tensions on the Pak-Afghan border serving as reminders of the systemic risks inherent in the current global order. As markets look toward March, the focus will shift to China’s “Two Sessions” and upcoming US labour data, which will likely determine whether the record-breaking momentum in London and Sydney can be sustained, or if the inflationary headwinds facing Wall Street and Mumbai will become a broader global trend.

Disclaimer

This article is provided for general information purposes only and does not constitute financial or investment advice. Stock market investments are subject to market risks, and previous performance is not necessarily indicative of future results. The information presented is based on data available as of 27 February 2026. Readers should conduct their own research or consult with a qualified financial professional before making any investment decisions. The author and publisher are not responsible for any financial losses or damages resulting from the use of the information contained in this report.

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