March Investment Newsletter

USD: Fed's Powell stuns market, hints at faster rate hikes; EUR: Eurozone investor confidence dips amid sluggish retail sales; ZAR: Widespread erosion of confidence across the building value chain; GBP: UK retail sales resilient despite energy cost concerns; JPY: Japan's economy maintains stability as BoJ sticks to low rates; AUS: Australia's trade balance dips unexpectedly in January.

USD: FED'S POWEL STUNS MARKET, HINTS AT FASTER RATE HIKES

During his recent semi-annual testimony, Chairman Jerome Powell delivered remarks that rattled the financial landscape. Powell's indication of a willingness to implement more aggressive interest rate hikes in response to prevailing economic indicators marks a significant shift in Federal Reserve policy.

Additionally, his call for stricter measures to address inflation highlights the depth of the challenges facing the economy.

These developments led to notable market reactions, including a sharp decline in equity indices such as the S&P 500, the Dow, and the Nasdaq composite, accompanied by notable increases in the US Dollar and yields on the 2-year Treasury.

EUR: EUROZONE INVESTOR CONFIDENCE DIPS AMID SLUGGISH RETAIL SALES

Eurozone investor confidence took a hit in the wake of lackluster retail sales performance in February.

Despite forecasts anticipating a 1.0% month-on-month growth, actual figures only showed a modest increase of 0.3%. Annually, retail sales remained in negative territory, with February's figures at -2.3% compared to January's -2.8%. However, amidst these challenges, there are bright spots.

The S&P Global Eurozone Construction PMI demonstrated resilience, rising to 47.6 from 46.1 the previous month. Analysts are buoyed by these developments, especially given the Eurozone's successful evasion of recession so far and positive wage trends.

ZAR: WIDESPREAD EROSION OF CONFIDENCE ACROSS THE BUILIDING VALUE CHAIN

The FNB/BER Building Confidence index, a comprehensive gauge of sentiment across the building value chain, plummeted by 16 points in 1Q24, landing at a mere 27 points.

This represents a significant downturn from the previous quarter and marks the lowest level since 1Q21, a period dominated by Covid-19 lockdown restrictions. Despite two quarters of positive growth, hopes for sustained momentum in the building sector were dashed by this latest setback.

Most notably, the decline was widespread, with four out of six sub-sectors experiencing substantial decreases, indicating a pervasive lack of confidence throughout the industry.

GBP: UK RETAIL SALES RESILIENT DESPITE ENERGY COST CONCERNS

Despite concerns surrounding escalating energy costs and the looming possibility of tax hikes, UK retail sales remained surprisingly resilient in February.

Following Valentine's Day, sales surged by 5.2%, a notable performance albeit slightly lower than the 6.7% increase recorded last year. However, beneath the surface, consumer behavior reflects a degree of caution, as households prioritize essential spending and trim non-essential items.

A recent Barclays survey of 2,000 consumers sheds light on this trend, revealing that more than two-thirds are actively seeking ways to curtail their weekly expenses amidst economic uncertainties.

JPY: JAPAN'S ECONOMY MAINTAINS STABILITY AS BOJ STICKS TO LOW RATES

Despite facing significant global economic headwinds in the latter part of 2022, Japan's economy resiliently skirts the edge of recession.

The final quarter saw a modest 0.1% expansion, slightly below the anticipated 0.6%, resulting in an almost negligible quarter-on-quarter change of 0.02%.

While the easing of COVID-19 restrictions fosters improved domestic spending, the unprecedented levels of inflation, hitting four-decade highs, pose a formidable challenge to Japan's prospects of a robust consumption-driven recovery.

AUS: AUSTRALIA'S TRADE BALANCE DIPS UNEXPECTEDLY IN JANUARY

Australia's trade balance faced an unexpected downturn in January, largely attributed to a surge in automobile imports that offset marginal gains in exports.

Despite posting a surplus of AUD 11.69 billion, down from December's AUD 12.24 billion and falling short of market estimates of AUD 12.5 billion, the nation's trade outlook remains multifaceted.

The anticipated revival in commodity exports, bolstered by China's economic recovery, offers a promising narrative. As Australia's largest trading partner, China's relaxation of zero-COVID policies is anticipated to stimulate demand, presenting a significant opportunity for trade expansion and economic rejuvenation.