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Weekly Market Focus - 25 March 2019

Markets

WEEKLY FOCUS: Manufacturing PMIs in Europe indicate headwinds                                                25 March 2019
 

 

Most developed market indices ended the week lower after the flash PMIs for France and particularly Germany disappointed with a reading of 44.7 for the latter representing its lowest level since 2012. These are the two largest economies in the Eurozone and their impact is being felt (see chart above). A decrease in orders seems to be the main factor as businesses remain cautious following headwinds in the automobile sector and the uncertainty around the US - China trade talks lingers on. The services data is not as bad and can reduce the effects of the slowdown in the near term. The US seems relatively better off as their Manufacturing PMI of 52.5 shows expansion, although it is worth noting that this is a 21 month low and the services data is also weakening. The survey forecasts that GDP growth for Q1 will remain above 2%.

 

Weakening economic data should not be a surprise and is the reason why the FED and the ECB made a fast U-turn from their hawkish statements of last December. This was reiterated last week at the FOMC meeting where the forecasts of inflation and growth were lowered and the FED indicated there would be no hike in interest rates this year at a time that the spread between 10 year and 3 month sovereign yields turned negative.

 

A slowdown in profit growth of corporations in the coming quarters should force central banks to transit from a neutral to dovish stance. The key factor remains a slowdown in inflation without which a pivot will not occur. The January PCE deflator, FED’s preferred measure of inflation, is likely to drop to below 1.5% from 1.7% on account of lower base effects this week. A sustained fall over the next 2 quarters may be the catalyst for the central banks to act and this will represent a turning point for a definitive risk-on scenario.     

 

 

 

 

 

 

 

 

 

 

 

Value

Week

YTD

Equity Indices

 

 

 

S&P500

2,801

-0.77%

12.67%

S. Africa

3,388

0.05%

4.34%

Euro Stoxx50

3,306

-2.37%

9.40%

FTSE100

7,208

-0.29%

7.03%

DAX

11,364

-2.75%

7.63%

CAC40

5,270

-2.50%

12.64%

Swiss Mkt.

9,319

-1.73%

10.56%

FTSE MIB

21,079

0.16%

15.03%

Shanghai Comp

3,104

2.73%

24.47%

BSE Sensex

38,165

0.37%

5.79%

Nikkei

21,627

0.82%

8.06%

Major currencies

 

 

 

USDZAR

14.50

0.59%

0.49%

EURUSD

1.13

-0.10%

-1.08%

GBPUSD

1.32

-0.59%

3.97%

USDCHF

0.99

-0.82%

0.95%

EURCHF

1.12

-0.93%

-0.20%

USDJPY

109.92

-1.39%

-0.33%

EURGBP

0.86

0.52%

-4.90%

USDAUD

1.41

0.09%

-0.57%

Dollar Index

96.15

-0.45%

0.19%

Commodities 

 

 

 

Brent

67.03

-0.19%

28.41%

WTI Oil

59.04

0.89%

30.24%

Copper

2.84

-2.34%

5.74%

Aluminum

1,888.00

-0.07%

2.26%

Platinum

847.95

1.94%

7.30%

Sugar

12.57

0.40%

1.45%

Corn

378.25

1.34%

0.73%

Coffee

93.90

-3.84%

-6.98%

Gold

1,312.30

0.72%

1.78%

Cotton

76.59

1.43%

5.98%

Sovereign Yields

 

 

 

US10Y

2.44

(0.15)

(0.28)

UK10Y

1.02

(0.20)

(0.25)

Germany10Y

(0.01)

(0.10)

(0.25)

 

Contact us: Durban +27 (0) 31 566 3365 | CPT +27 ( 0 ) 21 851 0920 | JHB +27 ( 0 ) 11 017 7230 | Email: enquiries@pegasus-wm.com

Disclaimer: The research report has been prepared for information purposes and does not constitute an offer. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and the company accepts no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this report

 

 



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