25 March 2019
Bassanese Bites: We’re done – Week beginning: 25 March 2019
Global equity markets nervously retreated on the back foot last week and bond yields dropped further – reflecting soft US and European manufacturing data, a surprisingly dovish turn by the Federal Reserve, and inversion of part of the US yield curve.
The Fed’s latest set of “dot points” completely removed the two projected interest rate increases for this year – in a surprise for markets which had expected either no change or the removal of only one rate hike. While markets initially rejoiced, a nagging concern over “what the Fed might know” about the economy soon crept back into market thinking.
Not helping sentiment was Friday’s round of service and manufacturing surveys for both the US and Europe, which were all a bit softer than expected. Most concerning is that European manufacturing (especially in Germany) is so far failing to rebound after trade tensions and disruptions caused by new car regulations hurt activity late last year. China’s slowdown is taking its toll. The better news is that the service sector in both Europe and the US remains on a stronger footing, and even US manufacturing is overall still solid. If the trade wars ease and/or China more seriously re-stimulates its economy, global manufacturing stands a fair chance of recovery. Meanwhile, lower bond yields saw existing US home sales surge 12% in February.
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