CURRENCY MARKET WRAP  

USDJPY, +0.20%, $110.86
EURUSD, -0.04%, $1.1218
GBPUSD, -0.08%, 1.3033
USDCAD, -0.68%, $1.3346
AUDUSD, +0.30%, $0.7097
NZDUSD, +0.41%, $0.6804

The U.S. Dollar Index increased 0.1% to 97.27. U.S. Core PCE Price Index, which excludes food and energy, increased 0.1% (consensus 0.2%). On a year-over-year basis, the core PCE Price Index is up 1.8% (consensus 1.9%). The weak consumer spending report extended the run of soft data ranging from housing starts to manufacturing that have flagged a sharp slowdown in growth early in the first quarter. The key takeaway from the report is that the core PCE Price Index slipped below the Fed’s longer-run inflation target of 2.0%, which can be used by the FOMC as a reason for maintaining its newfound patient stance. The final University of Michigan Index of Consumer Sentiment for March increased to 98.4 (consensus 97.8). After slumping in January, due to the partial government shutdown, sentiment has rebounded. The key takeaway from the report is that a large share of households reported rising incomes and lower expected year-ahead inflation rates, leading to increased real income expectations.

NEC Director Larry Kudlow saying he believes the Fed should cut rates by 50 basis points since there is no inflation and the U.S. economy is fundamentally healthy. Kudlow’s comments came after Fed Governor Randal Quarles said further rate hikes may be necessary, as he remains optimistic about economic growth.

U.S. and China held “constructive” trade talks in Beijing last week, according to Treasury Secretary Steven Mnuchin and the White House. Trade talks will continue this week in Washington with China’s Vice Premier Liu He.

Risk appetite returned on Monday morning, following data released over the weekend that showed economic activity in China bouncing back in March. The official Purchasing Managers’ Index (PMI) rose to 50.5 (consensus 49.6) in March from February’s three-year low of 49.2, marking the first expansion in four months, according to data released by the National Bureau of Statistics (NBS) on Sunday.

STOCK MARKET WRAP 

S&P500, +0.67%, 2,834.40
Nasdaq, +0.80%, 7,378.77
Nikkei Futures, +0.71%, 21,210.0

The S&P 500 gained 0.67% on Friday, capping its best quarter since 2009 amid a risk-on sentiment and continued trade optimism. Friday’s advance propped the S&P 500 to a gain of 13.1% this quarter. The S&P 500 health care (+1.2%), industrials (+1.0%), and information technology (+1.0%) sectors outperformed the broader market. Conversely, the energy (-0.2%) and real estate (-0.1%) sectors were the lone groups to finish with losses.

Lyft (LYFT 78.29, +6.29, +8.7%) was the stock of the day after the company made its highly-anticipated market debut on the Nasdaq, opening at $87.24 after its IPO priced at $72.00 per share. In other key corporate news, several proxy firms came out in support for Celgene’s (CELG 94.34, +6.89, +7.9%) proposed merger with Bristol-Myers (BMY 47.71, -0.13, -0.3%), prompting Starboard Value to withdraw its proxy solicitation. Starboard remains opposed to the deal, though.

CURRENCY MARKET WRAP  

USDJPY, +0.20%, $110.86
EURUSD, -0.04%, $1.1218
GBPUSD, -0.08%, 1.3033
USDCAD, -0.68%, $1.3346
AUDUSD, +0.30%, $0.7097
NZDUSD, +0.41%, $0.6804

The U.S. Dollar Index increased 0.1% to 97.27. U.S. Core PCE Price Index, which excludes food and energy, increased 0.1% (consensus 0.2%). On a year-over-year basis, the core PCE Price Index is up 1.8% (consensus 1.9%). The weak consumer spending report extended the run of soft data ranging from housing starts to manufacturing that have flagged a sharp slowdown in growth early in the first quarter. The key takeaway from the report is that the core PCE Price Index slipped below the Fed’s longer-run inflation target of 2.0%, which can be used by the FOMC as a reason for maintaining its newfound patient stance. The final University of Michigan Index of Consumer Sentiment for March increased to 98.4 (consensus 97.8). After slumping in January, due to the partial government shutdown, sentiment has rebounded. The key takeaway from the report is that a large share of households reported rising incomes and lower expected year-ahead inflation rates, leading to increased real income expectations.

NEC Director Larry Kudlow saying he believes the Fed should cut rates by 50 basis points since there is no inflation and the U.S. economy is fundamentally healthy. Kudlow’s comments came after Fed Governor Randal Quarles said further rate hikes may be necessary, as he remains optimistic about economic growth.

U.S. and China held “constructive” trade talks in Beijing last week, according to Treasury Secretary Steven Mnuchin and the White House. Trade talks will continue this week in Washington with China’s Vice Premier Liu He.

Risk appetite returned on Monday morning, following data released over the weekend that showed economic activity in China bouncing back in March. The official Purchasing Managers’ Index (PMI) rose to 50.5 (consensus 49.6) in March from February’s three-year low of 49.2, marking the first expansion in four months, according to data released by the National Bureau of Statistics (NBS) on Sunday.

STOCK MARKET WRAP 

S&P500, +0.67%, 2,834.40
Nasdaq, +0.80%, 7,378.77
Nikkei Futures, +0.71%, 21,210.0

The S&P 500 gained 0.67% on Friday, capping its best quarter since 2009 amid a risk-on sentiment and continued trade optimism. Friday’s advance propped the S&P 500 to a gain of 13.1% this quarter. The S&P 500 health care (+1.2%), industrials (+1.0%), and information technology (+1.0%) sectors outperformed the broader market. Conversely, the energy (-0.2%) and real estate (-0.1%) sectors were the lone groups to finish with losses.

Lyft (LYFT 78.29, +6.29, +8.7%) was the stock of the day after the company made its highly-anticipated market debut on the Nasdaq, opening at $87.24 after its IPO priced at $72.00 per share. In other key corporate news, several proxy firms came out in support for Celgene’s (CELG 94.34, +6.89, +7.9%) proposed merger with Bristol-Myers (BMY 47.71, -0.13, -0.3%), prompting Starboard Value to withdraw its proxy solicitation. Starboard remains opposed to the deal, though.

The U.S. Dollar Index increased 0.2% to 96.89. The 2-yr yield declined five basis points to 2.21%, and the 10-yr yield declined four basis points to 2.37%.

In the EU, ECB’s Draghi indicated the central bank may maintain its highly accommodative policy for an even longer period. 2019 growth expectations for Italy were cut to zero by a confederation of industrial employers. Switzerland’s KOF Institute lowered its expectations for 2019 Swiss GDP growth to 1.0% from 1.6%. After selling off sharply on Tuesday, Euro remained under pressure as German 10 year bond yields drop to a 2.5 year low.

In Brexit, there was no sign of a breakthrough in the  deadlock on Wedesday when UK lawmakers failed to agree on an alternative to Theresa May’s beleaguered plan even as she offered to resign in a desperate attempt to save it. Facing intense pressure from her fractured party, the British Prime Minister said she would step down if and when her Brexit deal was delivered. There was a desire for “a new approach, and new leadership,” she told a meeting of lawmakers from her Conservative Party. Hours later, members of the House of Commons voted on a range of measures designed to break the impasse over Brexit – but failed to agree on any of them. May cited, “I am prepared to leave this job earlier than I intended in order to do what is right for our country and our party, I know there is a desire for a new approach and new leadership in the second phase of the Brexit negotiations and I won’t stand in the way of that.” Downing Street plans to put May’s Withdrawal Agreement back before Parliament before the end of the week.

The S&P 500 lost 0.46% on Wednesday, although it had been down as much as 1.1% on recurring concerns about slowing growth. Ten of the 11 S&P 500 sectors finished lower, led by health care (-0.8%) and energy (-0.7%). The industrial sector (+0.1%) was the lone group to finish higher.

The U.S. Dollar Index increased 0.2% to 96.80. The 2-yr yield closed one basis point higher at 2.26%, while the 10-yr yield declined one basis point to 2.41%.

U.S. Conference Board’s Consumer Confidence Index decreased to 124.1 in March  (consensus 132.0). The March decline represents the fifth decrease over the past six months.The key takeaway from the report is that while consumers remain confident in the economy’s ability to expand, the level of expectations has moderated.

Sterling is holding onto its recent gains on reports that members of Parliament are starting to see the current deal as a better alternative to no deal or no Brexit. However the Democratic Unionist Party (DUP) likened May’s plan to a prison sentence and said they would rather see a one year delay than support her withdrawal agreement. Their first step will be to hold a series of indicative votes later today on alternatives to May’s deal. Sterling will remain in focus as a result and subject to wild intraday volatility.

The RBNZ this morning left Official Cash Rate (OCR) at 1.75% (expected). The central bank stated that given the weaker global economic outlook and reduced momentum in domestic spending, the more likely direction of their next OCR move is down. It cites, “Employment is near its maximum sustainable level. However, core consumer price inflation remains below our 2 percent target mid-point, necessitating continued supportive monetary policy.” Markets interpreted the statement, with its introduction of an easing bias, as a major dovish surprise. Kiwi dropped 1.52% to a low of 0.6807 as a result of the dovish statement.

The S&P 500 gained 0.72% on Tuesday, as an early uptick in U.S. Treasury yields and gains in most global equity markets helped foster some risk-on sentiment. The benchmark index declined from a gain of 1.1% at its high to a gain of 0.2% at its low before rallying in the last 30 minutes of action. All 11 S&P 500 sectors finished higher with gains ranging from 0.4% (consumer discretionary) to 1.5% (energy). Many energy stocks benefited from an increase in oil prices ($59.94/bbl, +$1.05, +1.8%).

Shares of Apple (AAPL 186.79, -1.95, -1.0%) were up as much as 2.2% but steadily declined throughout the day. The stock took a leg lower into negative territory after Bloomberg reported a U.S. trade judge recommended a ban on imports of some iPhone models due to Apple’s infringement on a Qualcomm (QCOM 58.00, +1.36, +2.4%) patent. The judge’s findings will be subject to a full review by the U.S. International Trade Commission.

In M&A news, Uber Technologies (UBER) announced it will acquire Middle East rival Careem Networks for $3.1 billion, consisting of $1.7 billion in convertible notes and $1.4 billion in cash. Uber plans to kick off its IPO next month.

The U.S. Dollar Index lost 0.1% to 96.53. U.S. Treasury yields steadily declined throughout the day on dwindling growth expectations. The 2-yr yield dropped seven basis points to 2.25%, and the 10-yr yield dropped four basis points to 2.42% after briefly touching 2.39% – its lowest level since Dec. 2017.

Brexit still takes centre stage and unfortunately there are more questions than answers on the terms of the UK’s divorce from the European Union. The EU says the divorce deal is not open for renegotiation so the UK needs to accept the current Withdrawal Agreement by April 12th or make the choice between a much longer extension or leave with no deal at all. Prime Minister May admitted yesterday that she does not have the votes to hold a meaningful vote. MPs wrestled back control of Brexit from the government on Monday night, voting in favor of holding a series of votes on alternative Brexit options on Wednesday.

The S&P 500 decreased 0.08% on Monday in a session that showed little conviction from buyers or sellers. Lingering concerns about global economic growth tempered buying interest and contributed to a further decline in U.S. Treasury yields. The S&P 500 information technology (-0.4%) and financial (-0.4%) sectors dragged the broader market lower. Conversely, the consumer discretionary (+0.6%) and industrial (+0.2%) sectors outperformed.

Homebuilding stocks outperformed amid the continued drop in rates, providing strong support for the consumer discretionary sector. The SPDR S&P Homebuilders ETF (XHB 38.17, +0.49) advanced 1.3%. The Philadelphia Semiconductor Index (-1.3%), on the other hand, pulled back from recent gains, with many of its components weighing on the tech sector.

Apple (AAPL 188.74, -2.31, -1.2%) hosted a highly-anticipated service event, in which it introduced Apple TV Plus, Apple News Plus, Apple Arcade, and Apple Card. Apple did not mention a price for its TV video service. Apple News Plus, a magazine subscription service, will cost $9.99/month. Despite the event, shares of Apple underperformed throughout the day, losing 1.2%.

In M&A news, Thermo Fisher (TMO 268.80, +4.99, +1.9%) will expand its presence into the gene therapy field after announcing it will acquire Brammer Bio for approximately $1.7 billion in cash.

Dollar sold off against its G7 counterparts after the Federal Reserve’s dot plot forecast revealed that 11 out of 15 US policy makers no longer believe that a rate hike is necessary this year.

The Fed left the target range for the fed funds rate unchanged at 2.25-2.50%; signalling that it does not expect any rate hikes now in 2019 versus two rate hikes at the time of the December 2018 meeting; and said it will begin tapering its balance sheet in May with an end date of Sept. 30.

Leaving the fed funds rate intact was widely expected. Projecting zero rate hikes in 2019 and only one in 2020, along with providing an end date for its balance sheet runoff was a surprise. These actions made it clear that the market doesn’t have to fear the Fed like it did in the fourth quarter.

U.S. Treasury yields and the U.S. Dollar Index (95.95, -0.43, -0.5%) dropped on the Fed’s dovishness. The 2-yr yield fell six basis points to 2.40%, and the 10-yr yield fell eight basis points to 2.54%. The curve-flattening trade weighed heavily on the financial sector, as a compression in spreads caused concerns that net interest margins will be weak for lenders.

In Brexit, markets were disappointed that UK Prime Minister May asked the European Union for only a short Brexit extension to June 30th. In her letter to European Council President Donald Tusk, she said she was not prepared to delay Brexit any further. In doing so, it is clear that she plans to bring the Withdrawal Agreement to a third vote but as the Speaker of the House and the EU has warned, major changes need to be made for it to be considered. She is jamming the twice rejected agreement down everyone’s throats and both Parliament and the EU are putting up a fight. Parliament is trying to arrest control of the Brexit process and according to France’s foreign minister, if May cannot offer guarantees that a Brexit deal will be passed, the extension request will be turned down. May will travel to Brussels for a summit of EU leader later today, where she is expected to discuss the extension with other member states.

The S&P 500 declined as much as 0.7% on Wednesday, as an earnings warning from FedEx (FDX 175.07, -6.34, -3.5%) helped fuel economic growth concerns. The benchmark index then advanced as much as 0.4% after the Federal Reserve provided a series of updates coming out of its FOMC meeting that created an impression it has shifted even further to a dovish mindset. The knee-jerk buying interest cooled off, though, leaving the S&P 500 down 0.29% for the day.

The S&P 500 financial sector (-2.1%) was the day’s outright laggard, dragged lower by a sharp drop in U.S. Treasury yields following the FOMC announcements. Conversely, the communication services (+1.2%) and energy (+0.9%) sectors outperformed. The energy space benefited from oil prices ($60.20/bbl, +$0.86, +1.4%) setting a new yearly high following some bullish inventory data.