March saw a generally a downhill trend for major markets with investors displaying some nervousness catalysed by President Trump’s China targeted trade tariffs also hitting European and other allied markets leading to fears of a global trade war further depressing markets.
United Kingdom
In the UK, although Brexit negotiations moved forward, the economic landscape remained mostly unchanged with slight increases in wage growth and a drop in inflation. While real wage growth has increased, the weak pound has contributed to relatively high food inflation and further compacted disposable incomes.
With consumer confidence still subdued, and Equities, the FTSE 100, UK 10-year Gilt yields all down, and banks and retailers noticeably weakened, caution with the UK economic outlook, at least in the short term, seems prudent.
Europe
European markets followed their American counterparts with a general downhill trend with Italy faring better than most as investors cleaned up bargains remaining from the fallout of the Italian election.
Politically in Europe, Germany saw it’s first full month under a new ‘Grand Coalition’, following almost six months without a government, while Italy saw the populist Five Star movement win a healthy, but insufficient, 32% of the vote, leaving them governmentless for now.
In France, President Macron’s attempt to overhaul the state railway as part of a larger package aimed at reforming and modernising the economy, resulted in Strike action, with French rail union negotiations being notoriously difficult in the past, and the inevitable adverse effect on the financial landscape.
Reacting to the US, China directed, steel and aluminium tariffs that also largely included US allies, Europe has been forced to consider responding by setting tariffs of its own on American imports.
USA
Despite rising tensions around US/China trade, overall US economic data remains broadly very positive with robust growth in the US economy in March, with consumer and business confidence remaining strong.
Conversely, US equity markets reacted badly to the China tariffs, with the S&P down 2.7%; further compounded by the Facebook personal data debacle and President Trump’s criticism of Amazon’s tax and business practices.
The first meeting of the US Federal Reserve under a new chairman, declared the “the economic outlook has strengthened in recent months” and promptly raised interest rates by 0.25%, with a further two raises expected in 2018.
Japan
Japanese equities fared poorly in March with Softbank being the weakest performer, falling 10.4%. The financial landscape was further affected by politics as Abe’s approval ratings hit new lows in the latter half of the month following new information coming to light in a long-running cronyism scandal.
While the manufacturing PMI slightly decreased, on the upside, GDP and household spending improved and the bank of Japan retained its key policy settings as inflation edges towards the 2% target.
Emerging Markets
Although emerging markets fell during March, they fared slightly better than developed markets, with both Korea and Taiwan markets seeing positive returns while others declined.
Russia was the weakest performing market as the Rouble fell with US-led sanctions introduced during the month.
Trump’s tariff announcement inevitably shook the Chinese markets resulting in the Shanghai Composite falling although direct trade with the US only equates to around 3.5% of the GDP.
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