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Weekly Update – March 22, 2019

  • Global stocks sold off sharply on Friday, putting most markets into the red for the week. A few Asian markets held onto
    gains. Investors fled for the exits as warning lights flashed from the bond markets: for the first time since 2016, the German
    10-year Bund yield dipped into negative territory; what’s more, the yield on the ten-year U.S. Treasury note dropped
    below the three-month T-bill yield, a so-called “yield-curve inversion” widely considered to be a harbinger of recession.
  • Bond markets tumbled in reaction to disappointing data from the Eurozone and U.S. manufacturing sectors. The weak
    economic data drove up government bond prices, pushing yields down. The ten-year note finished at about 2.44%, its
    lowest yield since December 2017. The U.S. dollar was volatile but gained against a basket of currencies.
  • Oil prices hovered around $60 a barrel after a large withdrawal from U.S. crude reserves, but on Friday subsided in step
    with stocks. Gold prices rose, perhaps in reaction to the broad, “risk-off” sentiment that gripped markets.
  • The IHS Markit Manufacturing PMI index for Germany contracted to 44.7, its worst level in over six years. The Markit U.S.
    Composite PMI index fell to 54.3 from 55.5 in February, the weakest reading since September.
  • The National Association of Realtors reported existing home sales rose 11.8% in February, the largest monthly gain since
    2015. The NAHB’s index of homebuilder sentiment ticked down one point to 62 in March; sales expectations for the next
    six months rose to 71.
  • The March Philadelphia Fed manufacturing survey rose to 13.7, strongly rebounding from February’s -4.1, the first
    negative reading in almost three years. New orders increased modestly. Respondents were generally less optimistic but
    still expected to expand employment. Separately, initial jobless claims declined to 221,000, the lowest reading since
    January.
  • The March Federal Open Market Committee meeting concluded with no change in rates but a dovish pivot in the
    policy statement and projections; the latter showed no 2019 rate hikes, down from two in December, and one in 2020.
    Analysts noted the statement and projections suggested a substantial change in FOMC officials’ assessments.

CPWM Weekly Market Monitor (2019.03.22)

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