What mattered last week and a preview of the week ahead 18th March

What mattered last week:

  • U.S. stocks rallied, recovering from the losses of the previous week. The S&P500 finished +2.89% higher while the Nasdaq posted a 4.15% gain for the week.
  • The rally in stocks prompted by hopes that the global soft patch in data might be bottoming, supportive G3 central bank policies and more stimulus from Chinese authorities.
  • Not to mention, 10-year U.S. interest rates falling to 2.59% and closing in on a retest of the 2.54% low from early 2019. Furthermore, Fed fund futures are fully priced for a 25bp Fed cut by October 2020.
  • The rally in stocks coming despite the much-anticipated U.S.- China trade deal being pushed back until April. Likewise, Brexit appears destined to be delayed until June 30 after the UK Parliament rejected PM Theresa May’s revised withdrawal agreement.
  • In Australia, concerns of falling home prices and its effect on heavily indebted households resulted in the ASX200 falling by about -0.50% to 6175.2, led by consumer and financial shares.
  • Interest rates continue to fall in Australia as expectations of an interest rate cut gather momentum. 3-year bond yields trading back near the RBA cash level of 1.50%.
  • The AUDUSD staged a modest recovery from ahead of the strong support .7000c area, to close the week at ~.7085.

For the week ahead, the key events are:

Australia: House price index, RBA meeting minutes (Tuesday), labour force (Wednesday).

  • Labour force (Wednesday): The market is expecting a 15,000 gain in jobs and the unemployment rate to remain stable at 5.0%. The market is likely to be more sensitive to a softer than expected number as opposed to a stronger employment number, given ongoing nervousness about the state of the Australian economy.

New Zealand: 1Q consumer confidence (Monday), global dairy auction, 4Q current account (Tuesday), Q4 GDP (Wednesday).

China: nothing of note.

Japan: CPI (Thursday).

U.S.: Factory orders (Tuesday), FOMC interest rate meeting (Thursday), Markit PMI’s and existing home sales (Friday).

Fed speakers on the wire this week include Bostic and Evans.

  • FOMC (Thursday): With rates on hold for the timing being, attention will focus on any guidance about the timeline for ending the Fed’s balance sheet unwind and further clarity into potential catalysts for the Fed to resume raising rates.

Canada: CPI and retail sales (Friday).

Euro Area: EA balance of trade (Monday), German ZEW business survey (Tuesday), EA flash consumer confidence, German and EA Markit PMI’s (Friday).

  • Markit PMIs (Friday): The market is expecting to see a further modest recovery in the EA and German composite PMI’s, from their December low points.

UK: Labour market report (Tuesday), CPI and PPI (Wednesday), BoE Interest rate meeting and retail sales (Thursday).

  • Parliament vote on Brexit deal (Wednesday). After five more Brexit votes last week, including a vote on holding a 2nd referendum, the only one to pass was the one in favour of delaying the Brexit process. The delay is contingent on Parliament again voting down PM Theresa May’s withdrawal agreement this Wednesday, which is then likely to trigger a request to the EU for a 3-month extension, to June 30.


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