NOTABLE MOVES
As of Sat, Mar 23, Singapore Time zone UTC+8
USDJPY, -0.80%, $109.92
EURUSD, -0.52%, $1.1314
GBPUSD, +0.62%, $1.3212
USDCAD, +0.52%, $1.3429
AUDUSD, -0.39%, $0.7084
NZDUSD, -0.07%, $0.6877
S&P500, -1.90%, $2,800.71
Nasdaq, -2.23%, $7,326.06
Nikkei Futures, -0.39%, $21,340.0
CURRENCY MARKET WRAP
The Dollar benefited from the flight to safety, lifting the U.S. Dollar Index 0.2% to 96.65. U.S. 2-yr yield dropped eight basis points to 2.32%, and the 10-yr yield dropped eight basis points to 2.46%. The spread between the 3-month yield (2.45%) and the 10-yr yield briefly inverted for the first since 2017.
Germany’s Manufacturing PMI fell to 44.7 from 47.6 in February, serving as a reminder that output in a major export center remains weak. France’s Manufacturing PMI (actual 49.8 vs prior 51.5) fell below 50.0, which indicated that the country’s manufacturing sector was also in contraction. The weak data sent investors flocking to safe-haven bonds, which drove the yield on the 10-yr German bund (-0.011%) into negative territory for the first time since 2016. The lower yields in Europe likely contributed to increased buying interest in U.S. Treasuries, which helped drive yields even lower. Investors were worried about growth after the ECB cut its forecasts earlier this month and today’s PMI reports show how deep those concerns run. Adding salt to the wound are the possibility of European auto tariffs – Trump said on Wednesday that the EU has been very tough on the US for many years and “we’re looking at something to combat at.”
Prime Minister May finally requested for a 3 month extension of Article 50 and the European Union approved a delay. They said that if May can persuade Parliament to accept the current Withdrawal Agreement, the UK would leave the European Union on May 22nd, one day before the European Parliament elections. However if she fails, they have until April 12th. In that time, they will need to decide if the current deal, no deal or no Brexit is their next course of action. The EU refuses to be trapped in a long extension. Unfortunately this means that a disruptive Brexit is still on the table so while sterling ended the week off its lows, the risk is to the downside.
STOCK MARKET WRAP
The S&P 500 dropped 1.9% on Friday, as weak manufacturing data out of Europe added to worries about the pace of global economic activity. Growth concerns were reflected by another drop in U.S. Treasury yields, the underperformance of the cyclical sectors, and a pullback in oil prices ($59.01/bbl, -$0.94, -1.6%). Ten of the 11 S&P 500 sectors finished lower, led by materials (-3.0%), financials (-2.8%), and energy (-2.6%). Conversely, the utilities sector (+0.7%) was the lone group to finish higher.
In earnings news, Dow component Nike (NKE 82.19, -5.82, -6.6%) didn’t help ease growth concerns after it reported underwhelming growth in North American sales, though it did beat earnings estimates.