Markets Today: China factory activity surges, French inflation jumps, FTSE 100 eyes further gain as data releases lie ahead

• A rapid "unwinding" of the geopolitical risk premium in both Gold (XAU/USD) and WTI crude is expected if Middle East de-escalation headlines gain further traction.
• A breakout above the 10,269 technical level on the FTSE 100 is needed to confirm a sustained recovery, with a potential target of the 10,500 area in early April.
• The European session focuses on the release of Euro Area CPI data and speeches from several ECB officials.

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Japanese equities struggled for direction on Tuesday as the Nikkei 225 limped toward a bleak monthly finish.

Despite a marginal 0.02% gain to close at 51,896.91, the benchmark index remains on track for a staggering 11% decline in March, marking its steepest monthly retreat since May 2010. While the broader Topix managed a more respectable 0.5% bounce to 3,559.92, the overall technical picture for Japanese stocks remains fragile.

The primary headwind remains the deteriorating situation in the Middle East. Tech shares bore the brunt of the selling pressure overnight, tracking a weak lead from Wall Street after an Iranian attack on a crude tanker in Dubai sent shockwaves through energy markets. The escalation has reignited fears of a broader regional conflict, naturally weighing on high-beta sectors.

However, the downside was somewhat cushioned by headlines suggesting a potential de-escalation in rhetoric. A report from the Wall Street Journal indicated that President Trump may be open to winding down military operations against Iran, even if the strategic Strait of Hormuz remains partially restricted.

China’s manufacturing sector showed renewed signs of life in March, with the official NBS Manufacturing PMI jumping to 50.4. This figure comfortably cleared the 50.0 neutral threshold, beating market expectations of 50.1 and marking a significant recovery from February’s 49.0 print.

This represents the strongest expansion since March last year, signaling that the powerhouse economy may be finding its footing after a shaky start to 2026.

The rebound appears to be dual-fueled. Domestically, front-loaded government spending has provided a much-needed cushion, while on the global stage, the insatiable appetite for AI-related hardware continues to bolster Chinese exports. The "New Orders" sub-index saw a massive swing back into expansionary territory, hitting 51.6 from a previous 48.6, while export demand also showed a marked improvement.

While the growth headlines are positive, the report carries a sting in the tail: surging costs. Input prices (63.9) and output prices (55.4) have both spiked to four-year highs. This is largely a byproduct of the volatility in the energy and metals markets, with crude oil and non-ferrous metals driving overheads higher. For the PBOC, this creates a potential headache as they balance the need for growth with brewing factory-gate inflation.

From a macro perspective, this data keeps the "China Recovery" narrative alive. If the PMI can hold above the 50.0 handle in the coming months, it could provide a floor for risk-sensitive assets and the Yuan. However, traders should keep a close eye on those surging input costs, if they continue to climb, they could eventually crimp the very "Buying Activity" (50.9) that fueled this month’s beat.

European equity futures are pointing to a positive start this Tuesday, with the Euro Stoxx 50 and Stoxx 600 climbing 0.5% and 0.2% respectively in premarket trade.

The primary catalyst for this "relief bounce" stems from across the Atlantic, following reports that US President Donald Trump has signaled a willingness to wind down military operations against Iran even if the strategic Strait of Hormuz hasn't fully reopened.

While the headlines from Washington offered a reprieve, the situation on the ground remains volatile. A fresh Iranian strike on a Kuwaiti oil tanker near Dubai serves as a stark reminder that the "geopolitical risk premium" isn't going away just yet.

For traders, this creates a tug-of-war between improving high-level diplomacy and the persistent threat to global shipping and energy supply chains.

The energy sector remains the focal point of global macro shifts this Tuesday. Brent Crude futures managed to shake off early session losses of 1% to trade marginally higher at $112.96. Despite the intraday "choppiness," the broader technical picture is one of extreme strength; Brent is currently on track to secure a record-breaking monthly advance as supply-side anxieties continue to dominate the narrative.

As we head into the final hours of the March session, traders should note the significant spread between the expiring May contract and the more active June contract, which currently sits at $107.10.

Meanwhile, WTI (West Texas Intermediate) took a slight breather, slipping 0.24% to $102.63. After touching its highest level since March 9 earlier today, the US benchmark appears to be finding some resistance as the "Risk-Off" premium sees a marginal cooling.

In the precious metals space, Gold (XAU/USD) provided a textbook example of a relief rally on Tuesday. Spot gold surged 1.5% to $4,578.89, buoyed by whispers of a potential diplomatic de-escalation in the Middle East.

However, one green day cannot mask the underlying technical damage; the yellow metal is still poised to record its worst monthly performance in over 17 years.

For XAU/USD, the $4,600 level (April Futures) remains the immediate psychological hurdle to clear. For WTI, as long as prices hold above the $100.00 handle, the structural bull trend remains intact. However, if de-escalation headlines gain more traction, we could see a rapid "unwinding" of the geopolitical premium in both assets as we head into April.

The Japanese yen stabilized around 159.6 per dollar on Tuesday, holding gains from the previous session, supported by repeated verbal warnings from Tokyo and growing market positioning for a possible intervention.

On Monday, top currency official Atsushi Mimura said the government would take decisive action if needed, echoing earlier remarks from Finance Minister Satsuki Katayama. Their comments came as the yen weakened past the critical 160 per dollar level that had previously prompted Tokyo to intervene in currency markets in July 2024.

The US Dollar (DXY) is on track to post its most aggressive monthly gain since July, firmly establishing itself as the premier safe-haven asset in a volatile global landscape. After hitting a multi-month high of 100.61 on Monday, the index continues to hover around the 100.47 handle, marking a staggering 2.9% climb through March.

The Greenback’s strength is perhaps most evident in its 1% surge against the South Korean Won (KRW). Pushing the pair to the 1,534 level, we are now seeing exchange rates that have historically only surfaced during major systemic shocks, such as the 2009 Global Financial Crisis and the 1997/98 Asian Financial Crisis.

This suggests that the current flight to quality is not just a trend, but a fundamental shift in capital flows.

Currency Power Balance

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The European session is busy today. We have Euro Area CPI due later in the session as well as a host of ECB speakers.

French inflation data was released a short while ago and saw a dramatic shift in March, with the annual rate jumping to 1.7%, its highest print since January 2025.

This acceleration from February’s 0.9% reading caught the market slightly off guard, edging past the consensus estimate of 1.6%. After a period of relative cooling in the Eurozone's second-largest economy, this "hot" preliminary estimate suggests that the disinflationary trend may be hitting a significant geopolitical roadblock.

Looking at the US session and the US Dollar Index (DXY) is currently pressing the top of a nine-month trading range at 100.50. As we head into the March close, a combination of macro data and month-end rebalancing flows could determine whether the Greenback secures a breakout or faces a tactical retreat.

Looking at the data releases and we have the following:

• JOLTS (Feb): Expected to remain robust, providing a "higher-for-longer" floor for the Fed.
• Consumer Confidence (Mar): Expected to slide toward April lows (sub-55.0). A miss here would embolden the Fed's dovish wing and increase pressure on the White House to find a Middle East "off-ramp."

With US equities and bonds outperforming overseas markets this month, "Fixing Flows" could trigger significant Dollar selling. Institutional buy-side rebalancing typically leans toward selling the outperforming currency (USD) to reset portfolio weights.

The FTSE 100 is showing signs of a spirited recovery as we round out a volatile March. After finding significant buyers near the 9,660–9,700 liquidity zone, the index has staged a steady climb back toward key structural levels.

While the broader monthly picture remains pressured by geopolitical headwinds, the 4-hour technical setup suggests that the bulls are currently in the driver's seat for a short-term relief rally.

Looking at the H4 chart, the UK 100 is currently testing a significant internal resistance zone.

• Immediate Resistance: The index is hovering just below the 10,206 mark, which aligns with the 200-period SMA (dark blue line). This is a critical technical juncture; a clean break and daily close above this level could clear the path toward the next major psychological handle at 10,300 and the 100-period SMA (yellow line) at 10,410.
• Support Levels: On the downside, the 10,101 level (purple line) serves as immediate support. Below that, the massive psychological round number of 10,000 remains the "line in the sand" for bulls. If the index fails to hold the 10,000 mark, we could see a quick retest of the recent lows near 9,816.

The RSI (14) is currently sitting at 58.3, comfortably above the midpoint and showing a "Pivot" high on the indicator. Crucially, the RSI has exited the oversold territory seen earlier in the month, suggesting that momentum is shifting from a bearish "sell-the-rally" environment to a more balanced, if not slightly bullish, corrective phase.

A breakout above 10,269 would be the technical signal that the recovery has real legs, potentially targeting the 10,500 area heading into early April. Conversely, a rejection at the 200-SMA (10,206) would suggest this is merely a "dead cat bounce" before the bears attempt to drag the index back toward the 9,700 demand zone.

FTSE 100 Four-Hour (H4) Chart, March 31, 2026

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