European and UK Equity Capital Markets Review April 2026

• Following a weak March as the Middle East conflict knocked markets globally, a ceasefire and hopes of a negotiated settlement helped equity markets rally strongly in April although stagflation fears continue given the move in oil and energy prices. Europe’s higher exposure to the energy crisis versus the US has seen it underperform, with the FTSE All Share up 2.4% and Stoxx 600 up 4.8% on the month, whilst the S&P 500 closed up 10.4% and the Nasdaq up 15.3%. As the conflict and closure of the Strait of Hormuz continue, even in the event of a swift end, it is expected that the supply shock will take some time to work its way through the system.
  
  
• The impact of the Middle East conflict on energy prices and the broadening inflation risk if the conflict extends featured extensively in deliberations for central banks over the course of the month. Prior to the conflict markets were expecting rate cuts in the UK and the US but that has clearly pivoted since, although the very initial market reaction was arguably extreme (pricing in up to 1.00% rate hikes in the UK for example) considering the relatively loose labour market stands to limit second-round effects on inflation. Investec’s Economists expect rates to be on hold for 2026 in the UK and US, and two rate hikes in the Eurozone.
  
  
• At its April meeting, the ECB took the unanimous decision to leave rates on hold, noting that second-round effects were not yet visible in the inflation data, but this came with a warning that upside risks to inflation are intensifying. With inflation climbing to 3.0%, the market is expecting a first rate hike at the June meeting and more to follow. The BoE also left rates on hold with eight MPC members supporting the decision. Chief Economist Huw Pill voted for a 25bp rate hike. Whilst the MPC kept rate hikes on the table, noting they would not wait for second-round effects to materialise before acting, the markets’ anticipation of future BoE hikes has helped to tighten financial conditions without the MPC actually raising rates for now.
  
  
• The Fed also left rates on hold at its April meeting, but, unusually for the Fed, had a high level of dissent amongst its members. The meeting also marked Powell’s last as Chair, but he delivered the news that he will stay on as a Governor until he is certain that the DoJ probe into him is completely over. His continuation on the Fed has important ramifications. Incoming Fed Chair Warsh will need to become a Governor before being elevated to Chair. It was thought that he would take Powell’s seat, but it now looks like Miran, who is on a temporary placement, will have to step aside to make room for Warsh. Miran is the most vocal dove on the committee, and as such his absence will tilt the committee’s views.
  
  
• For the US, in addition to a greater degree of energy independence versus Europe, strong corporate earnings for Q1 also helped lift investor sentiment, with the indices reaching record highs. Tech stocks have been a large driver of the US outperformance, with Amazon up more than 25% and Meta, Microsoft and Alphabet also sitting on double-digit gains in April. Intel is up 85 per cent over the same period. Across the market cap spectrum, semiconductor and chip manufacturers have done well, as prolonged AI investment is expected to act as a sector tailwind.
  
  
• Despite the market volatility, ECM volumes had held up well in Q1 with ECM issuance of $43.3bn for 1Q26, above the 10-year average. April was quieter as the Middle East conflict delayed some processes, however, there remains a healthy longer-term pipeline. YTD ECM issuance remains ahead of 2025, with $49.7bn of issuance in 2026 versus $41.5bn in the comparative period. The US is expected to see strong IPO volumes this year, with SpaceX, OpenAI and Anthropic all rumoured IPO candidates. In the UK, ECM activity is also off to a strong start, with a significant pick up in the number of deals in 2026 vs 2025.
  
  
• In line with sector performance in the market, European IPO activity has been skewed to the energy, mining and defence sectors, driven by investor demand. Looking ahead, the IPO outlook for the rest of 2026 will remain closely tied to geopolitical developments in the Middle East. A swift resolution of the Iran conflict could help reopen IPO markets in the second half of 2026, while a prolonged conflict risks adding inflationary pressure and weighing on global growth. That said, a strong pipeline of IPO-ready companies and maturing private equity assets suggests a more consistent pick-up in activity once markets and IPO windows allow.
   

• Equity markets had begun 2026 well, with European indices continuing to outperform the US. Following the outbreak of the conflict in the Middle East, global markets sold off sharply in reaction to turmoil in energy markets following the closure of the Straits of Hormuz through which a material proportion of the world’s energy and chemical needs typically pass.
• In the first few months of 2026 concerns about US equity valuations, worries about a tech / AI ‘bubble’ given ever increasing capex into the ‘sector’, and evolving challenges in private credit markets led to European outperformance.
• With a ceasefire in place from 8th April, equities around the globe rallied over the course of the month, with US equities reversing their early underperformance given a robust Q126 earnings season for corporate America and the level of energy independence inherent within the US economy (particularly relative to Europe or Asia). As such, the S&P and Nasdaq made new record highs in April.
• In the UK for April the more domestically focused FTSE 250 has outperformed its more internationally exposed FTSE 100 counterpart finishing the month up 6.0% and 2.0% respectively. The FTSE AIM 100 closed up 11.4% and FTSE Small Cap up 6.1%. Elsewhere in April, the Stoxx 600 was up 4.8%, S&P 500 up 10.4%, Nasdaq up 15.3% and Russell 2000 up 12.2%.

• US equity valuations had seen a strong recovery post-’Liberation Day’ (02 April 2025), driven by a strong performance of Big Tech, but Europe’s rally into the end of 2025 saw the valuation gap reduce. Whilst the headline valuation differential between US and UK / EU equity markets remains significant, after adjusting for growth (and sector skew therefore) that differential significantly reduces.
• At the start of 2026, US Big Tech valuations came under pressure as investors grew increasingly concerned over large capex commitments and higher costs. Those investor concerns were evident in the early part of 2026 with asset allocations away from US (large cap) tech, but over April strong results helped restore a level of confidence in the AI thematic.
• Whilst UK equity market valuations do trail those in the US, adjusting for growth it is arguably fewer high-growth opportunities rather than an inability to value growth that drives the differential.
• All global indices have been impacted by the Middle East conflict, with a contraction in valuation multiples. Coupled with the sell-off in Big Tech, the valuation gap between the US and the rest of the world has narrowed. UK indices remain close to or below long-term averages and look attractive on a historic basis.

• UK March CPI inflation climbed to 3.3% from 3.0%, in line with consensus expectations. Core inflation fell to 3.1% from 3.2%, and below consensus expectations of 3.2%. The largest upward contributor to headline inflation in March was transport, reflecting an 8.7% surge in petrol prices on the month, and a 10.0% jump in airfares versus a 0.3% drop in March 2025, which took the annual increase up to 14.5% from 3.8%.
• Higher energy prices pushed up Eurozone inflation in April to 3.0% from 2.5%, whilst core fell to 2.2%. In the US, CPI inflation for March rose to 3.3% from 2.4%, with core inflation rising to 2.6%.
• The impact of higher energy prices due to the Middle East conflict began to show in March prints, however, regarding its ultimate effects, much depends on the length of the conflict, and the corresponding impact on not just on energy prices but on food and the degree of wider second-round effects. There is also the question as to how consumers fare in the face of these price rises, especially at a time when, unlike the UK, the US household saving rate is historically low, implying a shallow rainy-day fund.
• For April central bank meetings, the BoE, ECB and Fed all left rates on hold but all noted the intensifying upside risks to inflation.

• As the conflict in the Middle East drags on, investors have grown increasingly bearish with regard to the growth of the global economy, with growth expectations falling to their lowest since March 2022 and inflation expectations reaching their highest since May 2021. Despite this, investors have remained long stocks, with no surge in cash holdings.
• With the closure of the Strait of Hormuz ongoing, the geopolitical tail risk has seen investors forecast oil to be at $84/barrel at the end of 2026, with long oil and long semiconductors the most crowded trades.
• Given Europe’s exposure to the growing energy crisis and accompanying inflation shock, investors’ overweight position in European equities has continued to fade, while other regions have either seen improvements (US) or lesser declines (EM).
• However, the level of bullishness on European equities outright remains fairly resilient, with a net 33% of respondents seeing upside for the market over the coming months (little changed from last month), and the share of respondents worried about reducing equity exposure by too much, thereby missing out on a rally, is up from 21% to 46%.

IPO issuance in Europe

• US$622m raised from 7 IPOs in April 2026 across Europe, with an average deal size of US$89m. There were 3 IPOs greater than US$50m including Canadian copper mining Lumina Metals Corp ($297m), Polish quick-service restaurant operator Rex Concepts ($124m) and Turkish real estate investment company Agaoglu Avrasya Gayrimenkul Yatirim Ortakligi AS ($83m).
• So far in 2026, CSG’s IPO is most notable due to its size, and is the largest European IPO since Porsche in 2022 (including full exercise of the greenshoe), and was a significant transaction for European IPO markets in 2026.
• In 2025, there were 49 IPOs greater than US$50m, raising $17.8bn in total, with an average issue size of $363m (vs 47 IPOs in 2024, generating $17.9bn, with an average of $381m). Most core European IPOs had traded higher post-issue creating investor confidence, however heightened volatility since the onset of the Middle East conflict has unwound much of this performance.
• Elevated volatility in 2026 has seen shorter execution windows to allow issuers to mitigate market risk. Despite a strong start, widespread de-risking since the onset of the Iran war has seen investor risk appetite reduced and some processes delayed.
• Despite near-term uncertainty, the European IPO pipeline remains healthier than 2025, with a number of flagship assets preparing and monitoring market conditions / execution windows. Defence, Energy Transition and Insurance remain key themes and are well represented within the pipeline. UK IPO activity has yet to kick off in 2026, with a delay to several transactions given conflict driven volatility and uncertainty.