Macro:

US House of Representatives twice postponed a vote on a bill to replace the Obamacare program last week . The inability to overhaul the U.S. health care system, a major campaign promise of President Donald Trump and his allies, marked a significant setback for the president in a Congress controlled by his own party. US stocks took political developments in stride with the S&P 500 down 1.4% for the week while volatility rose – the VIX Index closed at year-to-date highs of 12.96.

Eurozone ‘flash’ PMI readings continue their climb.  The latest Markit Economics’ data show goods producers in the euro area expanded in March at the fastest pace in nearly six years, propelled by strong results in Europe’s two biggest economies: France and Germany.

In Hong Kong, Former Chief Secretary Carrie Lam was elected as the first female Chief Executive. She won the election with 777 votes from the 1,186 votes cast by the Election Committee, defeating former Financial Secretary John Tsang and retired judge Woo Kwok-hing who received 365 and 21 votes respectively.

Looking ahead, the key event for the last week of March will be the scheduled triggering of Article 50 by UK PM Theresa May on Wednesday (29 Mar) to notify the European Council UK’s intention to leave the EU bloc. This will start the formal two year process of negotiating an exit from the European Union.

Equities:

US equities led markets lower last week ostensibly on the threat to the US tax plan inferred from the difficulty Trump is facing in repealing the Affordable Care Act. The CBO released data unhelpful to his cause. If the ACA is not repealed as planned, the tax bill is expected to face resistance.

Weaker US equities and a weaker USD transmitted the risk aversion over to emerging markets as their currencies rose. China and Europe were less impacted.

Bonds:

Bond markets reflected the risk aversion in equity markets with a widening of credit spreads and a rally in duration.

Bunds were flat while peripheral spreads narrowed.

FX:

USD was weak against most majors and EM currencies coinciding with the weakness in US equities. There is a sense that the Trump trade was being unwound as the President struggled to get approval for his overhaul of the Affordable Care Act.

Commodities:

Oil was weak, however, Brent managed hold 50 while hovers just below 48. Volatile US inventory and rising rig counts have shaken confidence in the OPEC production cuts.

Industrial metals also saw some weakness likely on profit taking and technicals. China’s Caixin manufacturing remains safely over 50 (51.7 for Feb) and global manufacturing appears to be in growth mode.

 

Week ahead:

Mar 27

  • German Ifo report, retail sales
  • Italy business sentiment and consumer confidence
  • Eurozone M3
  • HK trade data
  • Korea GDP
  • Fed’s Evans speaks
  • EU’s Canete speaks

Mar 28

  • ECB’s Makuch speaks
  • US trade balance, Case Shiller 20 home prices
  • US consumer confidence
  • Fed’s George speaks
  • Japan retail sales
  • France consumer confidence
  • UK mortgage approvals, consumer credit

Mar 29

  • US pending home sales
  • Fed’s Williams speaks

Mar 30

  • Germany, Spain, CPI, HICP
  • India Bloomberg economic survey
  • Eurozone business climate, consumer, economic and industrial sentiment indices
  • US Core PCE
  • Japan industrial production and inflation

Mar 31

  • France CPI, HICP
  • German unemployment
  • UK current account
  • Eurozone CPI
  • US personal income
  • Fed’s Bullard speaks
  • Chicago PMI and Michigan Sentiment
  • China Manufacturing PMI