 Intensifying recession fear was the main theme in the markets in March, alongside never-ending Brexit and trade tensions. With downside risks to growth starting to materialize, major global central banks started their dovish turns. Most notably, Fed now forecasts no rate hike this year. ECB will keep interest rates unchanged at least through the end of the year, and downgraded economic forecasts. BoC dropped tightening bias. And RBNZ has just indicated last week that next move is a cut. Bond yields tumbled sharply globally. More importantly, 3-month to 10-yield yield, the most accurate predictor of US recession, inverted for a short period of time. However, the negative sentiments were no so much reflected in the stock markets. In March, DOW closed the month up 0.05%. S&P 500 rose 1.79% while NASDAQ rose 2.61%. In Europe, even after terribly poor Germany manufacturing data, DAX closed the move up 0.09%. CAC was boosted by China Airbus deal and rose 2.10%. FTSE also rose 2.89%. Nikkei was the sole major index that closed down -0.84%. China Shanghai SSE rose 5.09%. Hong Kong HSI rose 1.46% and Singapore Strait Times rose 0.01%. To us, it's just a matter of time stocks and bond markets align back together. Considering the technical picture of major indices, while more upside cannot be ruled out in the near term, reversals are likely around the corner, in particular in Nikkei. Upcoming March and April data should reveal more about the underlying development in the economies. It will likely be a rough ride for investors in Q2. For forex traders, should risk aversion dominates, there are prospects for more upside in Dollar and Yen. In the currency markets, Sterling was the worst performing one last week after the Parliament rejected the Brexit Withdrawal Agreement again while disapproving all other alternatives. Without any deal, Brexit deadline is now set at April 12. UK has just around two weeks time to decide how they'd like to move forward, a long delay, referendum, general election, or even just leave with no-deal. New Zealand Dollar was the second weakest after RBNZ indicates that next move is a cut. Meanwhile, Canadian Dollar was the strongest one last week after strong January GDP data. WTI crude oil also extended recent uptrend to as high as 60.72, ignoring verbal intervention by Trump. Australian Dollar was surprisingly the second strongest. It's partly supported by buying in AUD/NZD, and partly by resilience in Chinese stocks. However, Aussie could be vulnerable this week if RBA hints on a rate cut earlier than expected. For the month, Yen and Swiss Franc are the strongest, followed by Aussie. Sterling was the weakest, followed by Euro and Canadian. |
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