Global Markets:
- Asian Stock Markets : Nikkei up 0.35%, Shanghai Composite up 0.49%, Hang Seng down 0.61%, ASX up 0.18%
- Commodities : Gold at $1997.80 (-0.13%), Silver at $24.14 (+0.48%), Brent Oil at $85.48 (+0.65%), WTI Oil at $80.98 (+0.70%)
- Rates : US 10-year yield at 3.453, UK 10-year yield at 3.503, Germany 10-year yield at 2.299
News & Data:
- (AUD) Cash Rate 3.60% vs 3.60% expected
- (USD) ISM Manufacturing Prices 49.2 vs 51.2 expected
- (USD) ISM Manufacturing PMI 46.3 vs 47.5 expected
- (CHF) CPI m/m 0.20% vs 0.40% expected
Markets Update:
Asian markets were mixed, as investors weighed the impact of various macroeconomic news from the last 24 hours. The decision from Australia’s central bank RBA was a key event, as it signaled whether global central banks were taking comfort with the slide in inflation prints or getting concerned about the impact of tightening on financial markets. The RBA kept its cash rate unchanged at 1.5%, but hinted at a possible hike later this year if inflation and growth remained strong.
Oil prices notched their biggest gain in a year, after OPEC’s surprise decision to cut output forced market participants to refocus on the supply deficit. OPEC + will slash output by 1.16 million barrels per day from May, with the cuts running through to the end of 2023¹. This boosted energy stocks in Asia, especially in China, where the CSI 300 gained 1%. However, the higher oil price also spooked investors that inflation could pick up and force the Fed to remain on its hiking path. That said, a higher oil price also acted as a catalyst for profit taking, given the Nasdaq 100 has risen about 20% this year.
The US dollar index (DXY) fell 0.4% to 102.37, as a weaker-than-expected ISM manufacturing report dampened expectations of robust US growth. The ISM index dropped to 51.2 in March, down from 54.2 in February and below the consensus estimate of 53.5. This contrasted with the upbeat PMI data from China, which showed that manufacturing activity expanded for the third consecutive month in March. The DXY has been on a downward trend since peaking at 105.31 in early March, as the Fed signaled a pause in its rate hike cycle and global growth concerns eased.
Gold prices resumed their gains and rose 1.2% to $1973.80 per ounce, as the lower US dollar and lower bond yields boosted its appeal as an alternative asset. Gold has been recovering from its slump in February, when it fell below $1800 amid rising inflation expectations and higher real yields. Gold is seen as a hedge against inflation and currency debasement, but it tends to suffer when real interest rates rise.
Equity markets in APAC showed divergent performance, reflecting the different exposure to oil and technology sectors. Japan’s Nikkei 225 fell 0.7%, as tech stocks followed their US counterparts lower and automakers faced supply chain disruptions due to a fire at a chip plant. Australia’s ASX 200 rose 0.6%, as energy and mining stocks benefited from higher commodity prices and the RBA’s dovish stance.
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