HIGHLIGHTS
US equities dropped this week, with a high volatility level. It is mainly driven by the changing tariff situations and growth concerns. Bitcoin dropped significantly after the Trump administration decided to create a strategic reserve of Bitcoin and other digital assets. ECB cut rates by 25bps.
Eurozone: Germany announced a spending package on defense and infrastructure. EU increased the efforts on joint borrowing. These events boosted the euro’s value by almost 5% this week. The growth forecast for Europe has been upgraded, and the countries in the EU are encouraged to increase their military spending.
Oil: Oil prices dropped a lot this week, driven by the increase in US inventories and the increase in output from OPEC+. Markets expect there would be a delay in the restart by OPEC while the decision to increase production was after Trump called for lower oil prices.
China: CSI and HSI increased by 2% and 5.7% this week as the markets interpreted China’s Two Session meetings positively. China aims to achieve 5% growth to counter the crash in property, deflationary economy and trade tension with the US. Policymakers are willing to take a record budget deficit to inject trillions of RMB into the economy with a focus on domestic demand.
MARKETS
18,196.22 | -3.45% | |
S&P 500 | 5,770.20 | -3.10% |
Dow | 42,801.72 | -2.37% |
10-Year | 4.32% | +9bps |
Brent | 70.38 | -3.63% |
DXY | 103.90 | -3.40% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
Morgan Stanley: Investors are recommended to avoid market-cap-weighted index and look for equal-weighted index or active management such as hedge funds amid the current market outlook. Investors should be more cautious because of the seasonally weak market liquidity and uncertainty in policies.
UBS: We suggest hedging equity exposures to manage the near-term risks. April 2 is the deadline for further tariffs. With the debt ceiling debate, the uncertainty is going to remain high.
Fixed Income
UBS: There are opportunities in German government bonds (Bunds) given Germany's current fiscal position. 10Y bund yields increased, but we believe they overreacted with respect to the credit risk. The technical implications could also be overstated given the higher bund supply in the future.
Standard Chartered: The credit spreads of corporate bonds have widened despite lower nominal yields, implying the risk of weaker credit fundamentals. However, the widening credit spreads remain small and the fundamentals are improving, supported by the solid earnings.
Economy
Goldman Sachs: The recent economic data indicated a softening job market and growth concerns linger. There has to be more progress on inflation before the Fed considers starting to cut rates. One of the Fed officials does not support a cut in March while expecting 2 or 3 cuts this year. Markets are pricing 75bps by the end of this year.
Morgan Stanley: Markets are optimistic about a soft-landing in US and expect the GDP will be above 2% this year. Consumer confidence is the key as consumption is two-thirds of US GDP. Recent data is not favorable, including inflation, job market and policies. It could be too soon to react to these readings, but investors are recommended to be cautious.
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DISCLOSURE
This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.
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