Gerald Fitzgerald’s Market Review March 25th

LAST WEEK IN 30 SECONDS...

The week started brightly with the US Federal reserve indicating that no interest rate hikes were likely this year. However, the light quickly dulled as poor data emanating from China, coupled with the likelihood that Donald Trump and Xi Jinping’s trade meeting may be pushed back to June saw markets retreating. The largest beneficiaries of this change in market outlook were bonds with US treasuries and German bond falling to annual lows. The yield on a German 10-year bond currently stands at -0.03%.

Elsewhere, Brexit continues to drag along the road with little by way of agreement on the UK’s actual exit route from the EU. The UK has a potential extension to Article 50 until the 22nd May should an exit deal be agreed.

THIS WEEK IN 30 SECONDS...

Another week another UK parliament vote – this time it is on which of the Brexit options is most appealing. US officials travel to China this week in an attempt to gain further momentum on ongoing trade talks. Elsewhere, Germany is due to auction 10-year bonds on Wednesday and given their current negative yield, it will be interesting to see the extent of their demand.

From a data release perspective, Eurozone inflation metrics for March are due for release on Friday, with US inflation as measured by core Personal Consumption Expenditure (PCE) due for release on the same day.

INVERTED REALITY

With the US Federal Reserve not committing to any imminent rate hikes, recent market angst has seen the US yield curve invert. Seen by many as a harbinger of an impending downturn, it leaves the US Federal Reserve in an uncomfortable position of not only looking at upward only interest rate hikes but also the requirement to consider potential interest rate cuts.