Monthly Market Roundup cov. March 2024

European equity markets closed off a strong quarter, setting new highs in March. This was supported by strong economic data and the expectation that central banks will soon start cutting interest rates. Key sectors like financials and energy outperformed, while technology lagged.

The European Commission Economic Sentiment Indicator (ESI) rose to 96.3, in line with forecasts, showing improved confidence in industry, services, and retail. Eurozone composite purchasing managers’ index (PMI) hit a nine-month high of 49.9. A number above 50 indicates that businesses are growing.

The Swiss National Bank (SNB) surprised markets with a 25-basis points interest rate cut to 1.50%, weakening the Swiss franc, making it the first to cut rates. The European Central Bank (ECB) plans to assess wage pressures in June before taking any action, despite expected inflation easing in March.

The UK equity market closed higher in March, with the FTSE 100 hitting a 12-month high. After falling into recession in late 2023, The Office for National Statistics (ONS) showed the UK economy grew in January, driven by a 0.2% rise in Gross Domestic Product, from the services sector.

UK inflation dropped to 3.4% in February, the lowest since September 2021, surpassing forecasts. The Bank of England (BoE) held interest rates at 5.25%, expecting inflation to dip below 2% by the second quarter of the year, with markets anticipating rate cuts from June.

Wage growth slowed to 5.6% annually, and Chancellor Jeremy Hunt introduced a 'Budget for long-term growth,' including tax reductions and investment incentives. Consumer confidence remained stable despite some inflation concerns.

Equity markets in the US finished March up, with all three major indices - S&P 500, Nasdaq, and Dow Jones advancing to close out a strong quarter.

Investor sentiment improved thanks to, among other things, the prospect of lower US interest rates. US Federal Reserve (Fed) Chair Jerome Powell's early March testimony indicated that interest rate cuts could be imminent.

February's consumer price index inflation of 3.2% slightly exceeded economists' 3.1% forecast, while the core PCE price index matched expectations at 2.8%. 

Asia Pacific equity markets had a positive month, led by Taiwan and Korea, followed by Japan. The information technology and financial sectors performed well. Chinese markets saw gains and it’s consumer price index rose to 0.7%, allaying deflation concerns.

Korea's markets advanced, propelled by information technology and healthcare sectors, with the Bank of Korea forecasting 2.1% economic growth for 2024. Taiwan's markets thrived on strong IT company performance, with GDP up by 4.9% year-on-year.

Japan's stocks rose as the yen weakened and the export heavy industrials sector benefited.

Australian stocks gained ground, led by financials and materials, amid ongoing economic challenges.

Emerging equity markets had a positive month, with Asia leading as the strongest performing region driven by Taiwan and Korea. Latin American equities lagged, with Brazil declining. The economy showed resilience though, despite high interest rates.

China's equity markets had a positive month with communication services and materials sectors leading, although healthcare sectors detracted.

In India, the equity market made marginal gains after coming under selling pressure early in the month, the information technology sector had a particularly challenging time. However, the Indian economy is still robust.

March saw positive performance in fixed income markets, as government bonds rallied amid growing anticipation of impending interest rate cuts. US treasuries returned 0.60%, German bunds gained 0.95% and UK gilts were up 1.81% (local currency terms, ICE BofA data).

Eurozone inflation slowdowns increased expectations for European Central Bank rate cuts by June. The S&P composite purchasing managers’ index, indicating euro area business activity, reached a nine-month high of 49.9.

Corporate bonds also performed well, supported by narrower spreads, with US credit spreads hitting a two-year low. However, high yield credit spreads both fell to their lowest levels in two years.