Recent economic statistics have revealed little about the future trend of global growth, with figures that are sometimes slightly better than expected alternating with others that fall short of expectations, note Guy Wagner and his team in their latest monthly market report "Highlights".
“In the US, for instance, labour market statistics tend to diverge depending on the source used, with data based on business surveys painting a much more favourable picture than those collected from households,” says Guy Wagner, Chief Investment Officer (CIO) of the asset management company BLI - Banque de Luxembourg Investments. “In the eurozone, the divergence between persistently declining industrial production and expanding service activities persists.” In China, industrial production and retail sales appear to be accelerating again, while activity in the residential property sector remains depressed. “In Japan, wage negotiations could lead to the highest increases in 30 years, once again generating positive wage growth in real terms,“ estimates the Luxembourgish economist.
Neither too strong nor too weak US economic growth, continued easing of inflation levels and the prospect of lower key interest rates from central banks provided optimal stock market conditions, enabling many indices to continue their race to new heights. Guy Wagner
Inflation slows down in the US and Europe
After the considerable slowdown in inflation on both sides of the Atlantic over the past 18 months, the return to the 2% target could become more challenging. In the US, headline inflation rose from 3.1% in January to 3.2% in February. In the Eurozone, overall inflation fell from 2.6% in February to 2.4% in March.
Central banks maintain their key interest rates unchanged
In line with expectations, the US Federal Reserve left its key interest rates unchanged in March. Nevertheless, Chairman Jerome Powell reiterated his intention to begin the monetary easing cycle soon, despite recent signs of inflation tenacity, expressing confidence that price rises will move closer to the 2% target, even if the road to that point may prove bumpy. In the eurozone, the decision to keep interest rates unchanged was also accompanied by the prospect of the start of the monetary easing cycle, with the most likely date appearing to be the June session. In Japan, the central bank finally put an end to its policy of negative interest rates and yield curve control.
Slight easing of long-term interest rates
Long-term interest rates eased very slightly, benefiting from the prospect of key rate cuts by the US and European central banks scheduled to begin in June. The yield to maturity on the 10-year US Treasury note fell from 4.25% to 4.20%. In the eurozone, the benchmark 10-year yield fell in Germany, France, Italy and Spain.
Stock markets reach new highs
In March, stock markets continued their positive trend of the beginning of the year. Guy Wagner: “Neither too strong nor too weak US economic growth, continued easing of inflation levels and the prospect of lower key interest rates from central banks provided optimal stock market conditions, enabling many indices to continue their race to new heights.” The MSCI All Country World Index Net Total Return, expressed in euros, ended the month at a new all-time high. In geographical terms, the S&P 500 in the US and the Stoxx 600 in Europe also registered record levels at the end of the month. “Sector-wise, energy, materials and utilities were the best performers, while consumer staples, real estate and consumer discretionary advanced the least.”
