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.

The U.S. Dollar Index declined 0.2% to 96.37. WTI crude increased 0.1% to $59.34/bbl. U.S. Treasuries closed on a lower note, pushing yields slightly higher. The 2-yr yield and the 10-yr yield increased one basis point each to 2.46% and 2.61%, respectively.

Bloomberg reports that U.S. officials are concerned China will walk back its trade offers. A follow-up report from The Wall Street Journal offered a more positive perspective: the two sides are expected to hold meetings in Beijing and Washington over the next two weeks in hopes for a deal by the end of April.

The main event this week will be the Fed’s policy meeting, which concludes on Thurs morning. No action is anticipated, so market attention will fall on the new economic forecasts, Powell’s press conference, and the updated ‘dot plot’. Fed officials adopted a much more cautious tone in early 2019, indicating they’ll put their rate-hike plans on hold for the time being while they monitor the risks surrounding the economy. In the context of markets now seeing greater odds for rate cuts moving forward, a dot plot pointing to even one hike in 2019 could come as a ‘hawkish surprise’.

The S&P 500 advanced as much as 0.7% on Tuesday, bolstered by dovish expectations ahead of the Federal Reserve’s policy decision on Wednesday. Conflicting U.S-China trade headlines, however, induced some profit-taking interest after a recent stretch of gains, as did a late-day slide in oil prices, which hit their highs for the year earlier in the session. The S&P 500 was down as much as 0.3% but managed to close near its flat line.

S&P 500 utilities (-1.2%), financials (-0.8%), and industrial (-0.4%) sectors underperformed the broader market. Conversely, the health care (+0.8%), consumer discretionary (+0.5%), and information technology (+0.2%) sectors were the lone groups to finish with gains.

Notable chipmaker Advanced Micro Devices (AMD 26.00, +2.75) rose 11.8% as Google confirmed a partnership with the company for its new gaming streaming service. On the other hand, transport heavyweight Union Pacific (UNP 160.75, -5.49, -3.3%) dragged on the transportation average after it was downgraded to ‘Hold’ from ‘Buy’ at Loop Capital. Trucking stocks were also weak following a first quarter earnings warning from Covenant Transportation (CVTI 19.61, -1.79, -8.4%).

• The U.S. Dollar Index declined 0.1% to 96.49. It was a quiet session for most of the G7 currencies on Monday, with no notable data prints.
• U.S. Treasuries closed near their unchanged marks. The 2-yr yield and the 10-yr yield increased one basis point each to 2.45% and 2.60%, respectively. WTI crude rose 1.4% to $59.30/bbl, supported by news that OPEC canceled its April meeting and will let its current production cuts run until at least June.
• Theresa May’s Brexit strategy was dealt a major blow by House of Commons Speaker John Bercow when he effectively banned her from bringing her deal back to Parliament for a third time, unless it changes significantly. In his statement, Bercow invoked the rule  dating back to 1604, that the same motion cannot be put to a vote repeatedly. “It is a necessary rule to ensure the sensible use of the House’s time and the proper respect for the decisions which it takes. Decisions of the House matter,” he said. With the UK scheduled to leave the European Union on March 29th, time is running out and May needs to officially request for an extension of Article 50 from the EU. As this would need to be approved by all 27 remaining states, their next opportunity to get an extension is Thursday’s EU Council meeting.

• S&P 500 gained 0.4% on Monday in a session led by the cyclical sectors. Some follow-through buying interest amid a lack of “new” catalysts helped the market advance in front of the Fed’s policy meeting this week. The S&P 500 energy (+1.4%), consumer discretionary (+1.1%), financials (+1.0%), and industrial (+0.9%) sectors outperformed the broader market. Conversely, the communication services (-0.8%), real estate (-0.5%), and utilities (-0.4%) sectors underperformed.
• From a macro perspective, the market appeared uninterested by the latest developments pertaining to U.S.-China trade, Brexit, or slowing growth. Monday’s session also featured a burst of M&A activity and speculation. Notable deals included Fidelity National Information Services (FIS 108.12, -0.76, -0.7%) acquiring Worldpay (WP 108.51, +9.83, +10.0%) in a $43 billion cash-and-stock deal and Deutsche Bank (DB 9.26, +0.38, +4.3%) confirming it is in merger talks with Commerzbank (CRZBY 8.67, +0.58, +7.2%).

 NOTABLE MOVES  

As of Sat, Mar 16, Singapore Time zone UTC+8

USDJPY, -0.22%, $111.47
EURUSD, +0.19%, $1.1329
GBPUSD, +0.31%, $1.3298
USDCAD, -0.01%, $1.3334
AUDUSD, +0.36%, $0.7090
NZDUSD, +0.32%, $0.6845

S&P500, +0.50%, 2,822.48
Nasdaq, +0.88%, 7,306.99
Nikkei Futures, +0.57%, 21,240.0

CURRENCY MARKET WRAP 

• Industrial production increased 0.1% in February (consensus +0.4%). The capacity utilization rate dipped to 78.2% (consensus 78.5%). The preliminary March reading for the University of Michigan Index of Consumer Sentiment at 97.8 (consensus 95.5). The key takeaway from the report is thatreal income expectations, which account for inflation, increased in households across lower, middle, and upper incomes. That favorable outlook is supportive for consumer spending activity.
• U.S. Treasuries closed the session on a higher note, pushing yields lower across the curve. The 2-yr yield declined one basis point to 2.44%, and the 10-yr yield declined four basis points to 2.59%. The U.S. Dollar Index declined 0.2% to 96.60. WTI crude lost 0.3% to $58.39/bbl.
• BOJ maintained a pledge to guide short-term interest rates at -0.1% and 10-year government bond yields around zero percent. The widely expected decision was made by a 7-2 vote. In a nod to increased risks, the BOJ cut its assessment on overseas economies to say they are showing signs of slowdown. It also revised down its view on exports and output. The central bank also stuck to its view Japan’s economy is expanding moderately, but added a phrase that “exports and output have been affected by slowing overseas growth.”In January, it said only that the economy was expanding moderately.

STOCK MARKET WRAP 

• The S&P 500 gained 0.5% on this quadruple-witching expiration Friday, supported by reported progress in U.S.-China trade talks and the outperformance of semiconductor stocks. Friday’s advance capped an impressive 2.9% weekly gain in the benchmark index and established a new closing high for 2019. The S&P 500 information technology sector (+1.2%) was the session’s leader, followed by the consumer discretionary sector (+0.7%). Conversely, the real estate (-0.4%), industrials (-0.3%), and energy (-0.1%) sectors were the lone groups to finish with losses.
• Stocks began the session on a higher note, helped by a Chinese report that the U.S. and China have made “concrete progress” in talks about the text of a trade agreement. Separately, talk that China is considering using monetary tools to further help the economy, and Japan explicitly saying it will keep interest rates low for an extended period, aided investor sentiment. 
• Shares of Boeing (BA 378.99, +5.69, +1.5%) found some reprieve after AFP News Agency tweeted Boeing is going to roll out a software upgrade for its 737 MAX in ten days. Boeing responded, telling Reuters that its timeline for the software update has not changed and is expected to be rolled out in the coming weeks. On the other hand, Facebook (FB 165.98, -4.19, -2.5%), Adobe Systems (ADBE 257.09, -10.60, -4.0%), and Tesla (TSLA 275.43, -14.53, -5.0%) were some notable laggards Friday..

• New home sales decreased 6.9% month-over-month in January to a seasonally adjusted annual rate of 607,000 (consensus 623,000). On a year-over-year basis, new home sales were down 4.1%.The key takeaway from the report is that new home sales activity continues to be soft despite moderating price pressures.
• Initial claims for the week ending March 9 increased by 6,000 to 229,000 (consensus 225,000) while continuing claims for the week ending March 2 increased by 18,000 to 1.776 million. The key takeaway from the report is that there were no wide swings to disrupt the view that employers are generally reluctant to cut staff due to tight labor market conditions.
• U.S. Treasuries finished on a lower note, pushing yields higher across the curve. The 2-yr yield increased one basis point to 2.45%, and the 10-yr yield increased two basis points to 2.63%. The U.S. Dollar Index rose 0.2% to 96.78. WTI crude rose 0.5% to $58.58/bbl.
• In Brexit, Theresa May wins U.K. parliament’s backing for her plan to delay Brexit. Thursday’s vote also sets up May for a difficult meeting next week with the remaining 27 EU leaders who are themselves divided over the proposed extension to Brexit. The public response from the EU was guarded after the vote. While EU diplomats do not expect any extension request to be rejected outright, there is no consensus between the 27 remaining member states over how long to delay Britain’s exit date and what conditions to apply. But Donald Tusk, the European Council president, has said he will make the case for a long extension that allows Britain to “rethink” its approach to Brexit when he consults EU leaders in the run-up to next week’s European Council meeting. Sterling pulled back yesterday because a request to delay Article 50 leaves the UK right where it started.

• The S&P 500 lost 0.09% on Thursday in a tight-ranged trading session. The S&P 500 materials (-0.8%) and communication services (-0.4%) sectors underperformed the broader market. Conversely, the heavily-weighted financials (+0.4%) and information technology (+0.2%) sectors outperformed.
• A New York Times report indicated that Facebook is under criminal investigation for some of its data deals that it arranged with tech companies. In Boeing‘s case, it continued to be weighed down by concerns surrounding the forced grounding of its 737 MAX 8 and 9 planes. Johnson & Johnson for its part was ordered to pay $29 million to a woman with cancer who used Johnson & Johnson’s talcum powder regularly.

• The Dollar Index was lower on Wednesday. (96.48, -0.46, -0.5%). U.S. Treasury market was also quiet on Wednesday. The 2-yr yield and the 10-yr yield finished unchanged at 2.44% and 2.61%, respectively. WTI crude rose 2.3% to $58.27/bbl following some bullish inventory data out of the Energy Information Administration.
• In Brexit, politicians put forward a motion to rule out a “no-deal” Brexit on March 29, the current deadline. Sterling rallied sharply (as much as 2.3% to $1.3381) on the sign of strong parliamentary support for leaving the EU with a formal agreement with Brussels. The risk of a no-deal Brexit has worried central bankers and investors for months and with this option shelved, the UK economy is no longer at risk of a deep and fast contraction. There’s one more big hurdle for parliament to clear and that’s the timeframe for the extension of Article 50 – will it be the short 2 month extension or a longer 2 year addition. Later today, May will put forward a formal request to the European Union for an extension of Article 50.

• The S&P 500 gained 0.69% on Wednesday, although it lost some steam following Trump’s executive order to ground Boeing’s (BA 377.14, +1.73, +0.5%) 737 Max aircraft. Still, a break above the 2800 level for the S&P 500, along with a weakening dollar, helped the market steer past public scrutiny of Boeing. Trump’s executive order came after Canada decided to close its airspace to the 737 MAX earlier in the day. Canada’s decision wiped out an early 1.7% gain in shares of Boeing, while Trump’s decision sent BA down as much as 3.2%. Boeing, however, ultimately rebounded and ended the day higher by 0.5%.
• Despite the negative publicity surrounding Boeing, the ability for the S&P 500 to break above the 2800 level to begin the day encouraged follow-through buying interest. The benchmark index took out its November high (2815.15) intraday but finished just below that level.