News & Analysis

Week Ahead – Busy start to the Second Quarter

April 1, 2019

By Deepta Bolaky
 @DeeptaGOMarkets

Market Overview

Fears of a recession dominated the whole of last week because of the inversion of the US treasury yield curve between the 10-year and 3- month rates.

Last week, we discussed the uncertainties of using the inverted yield curve as an indicator of a recession and mentioned the importance of monitoring economic data to evaluate the red signals emerging from the bond markets.

As we entered a new quarter, despite elevated growth concerns towards the end of March, it should be highlighted that global stocks posted the best quarter in almost a decade.

Week Ahead – Busy start to the Second Quarter

Monday

It will be an eventful Monday with the focus on Manufacturing PMIs across China, Europe and the US. China will stand out as traders will be looking at the Manufacturing sector to determine the pace of the slowdown.

The world second largest economy went into contraction late last year and dropped to a low of 48.3 in January. February figures showed an improvement which was mostly fuelled by Lunar New Year distortions. Therefore, March figures will carry more importance.

We expect a slightly better figure for the US ISM Manufacturing PMI from 54.2 to 54.5.

Tuesday and Wednesday

The RBA will be in the limelight on Tuesday. After the Reserve Bank of New Zealand signalled a rate cut last week, it will be interesting to see whether the RBA take a similar big step towards growth concerns.

Aussie traders will also have to digest China PMI figures alongside a series of domestic economic data. Retail Sales, Trade balance, Exports and Imports will be released on Wednesday and we will also have Building permits, and construction index across the week.

Thursday and Friday

Thursday will be lighter than the rest of the week. The week will end with labour reports in the US and Canada. Nonfarm Payroll will be the highlight amid a packed US calendar.

Unemployment rate and Average Hourly Earnings are expected to remain steady at 3.8% and 3.4% respectively. Markets participants are expecting Non-farm payrolls to have picked up and added a number 175k jobs in March.

All in All, economic releases this week will be significant in justifying the dovishness of major central banks. However, any big miss in this week data may escalate existing fears about a recession and fuelled expectations of future rate cuts.

Geopolitics may take the lead in driving risk sentiment as investors are awaiting developments on the US-China trade negotiations and Brexit.

Probably what will be constantly on investors mind this week is:

Will we see signs from the economic data that will explain the movement and scepticism in the bond markets?

 

Tuesday, 01 April 2019
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0.228 0 0.114 0.143 0.879 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0.201 0 0 0 3.828 0 0