What mattered last week and a preview of the week ahead 1st April

What mattered last week:

  • U.S. stock markets finished the week and the quarter strongly. The S&P 500 rising 1.15% for the week and almost 13% for the quarter.
  • The ASX 200, finished the week unchanged, however it registered a gain of almost 10% for the quarter, with the large cap miners the drivers of the rally.
  • The rebound in stocks, following the large fall in the last quarter of 2018, the result of the Federal Reserve along with other key central banks adopting a more dovish bias and underpinned by hopes of a U.S. - China trade deal.
  • Stocks have ignored the inversion of the U.S. yield curve (where long-term interest rates have fallen below short-term interest rates) which has often been a good leading indicator of recession.
  • The soft March PMI’s in Europe, along with talk within the ECB about the possibility of moving to a tiered deposit rate, has resulted in the EURUSD falling back towards range lows, 1.1200 area.
  • In New Zealand, the RBNZ moved towards the start of an easing cycle, with the NZ interest rate market now priced for 40bps of cuts over the next 12 months.
  • The AUDUSD finished another week relatively unchanged at .7095, defying the trend of a stronger U.S. dollar across the board.

For the week ahead, the key events are:

Australia: HIA new home sales, NAB business confidence (Monday), building approvals, RBA interest rate meeting and Federal Budget (Tuesday), retail sales and balance of trade (Wednesday).

  • RBA meeting (Tuesday): The RBA is expected to keep the cash rate on hold at 1.50%, after receiving comfort from a fall in the unemployment rate to 4.9% in February and a desire to see the extent of fiscal stimulus announced in Tuesday nights Federal budget.
  • Retail sales (Wednesday): In recent months, retail sales have been soft, with December retails sales falling -0.4% and a slight rebound in January of +0.1%. The market is expecting a gain of 0.2% m/m for February.

New Zealand: NZIER Business confidence (Tuesday), global diary trade auction (Wednesday).

China: Caixin manufacturing (Monday) and services PMI (Wednesday).

Japan: Tankan business conditions survey (Monday), services PMI (Wednesday), leading economic index (Friday).

U.S.: Retail sales (Monday), ISM manufacturing, construction spending, business inventories and durable goods (Tuesday), ISM non-manufacturing (Thursday), employment (Friday).

  • ISM (Monday): In February, the ISM manufacturing index dropped to a two-year low of 54.2. The market is looking for a slight rebound back to 54.5 in March.
  • Employment (Friday): After nonfarm payroll growth slowed to just 20,000 in February, due to the government shutdown, the market is expecting a bounce back in March, of 170,000 jobs. The unemployment rate is expected to remain at 3.8%.

Fed speakers on the wires includes Bostic, Kashkari and Mester.

Canada: RBC manufacturing PMI (Tuesday), Ivey PMI and employment (Friday).

Euro Area: EA inflation flash (Monday), EA employment (Tuesday), EA retail sales (Wednesday), German factory orders (Thursday), German industrial production (Friday).

  • EA employment (Tuesday): The labour market has been a shining spot for the ECB, defying the slowdown in the wider economy. The unemployment rate is expected to remain at a 10 year low of 7.8% in February.

UK: Markit/CIPS manufacturing PMI (Monday), construction (Tuesday). Markit/CIPS services (Wednesday), Halifax house price index PMI (Friday).


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