March was a mixed month for global risk assets. Global equities were mostly higher with notable outperformance outside of the US, the USD weakened, the US interest rate curve flattened with a backup in rates at the short end, commodities were mostly lower with notable weakness in the energy complex, and credit spreads widened. Early in the month, the ECB indicated that additional stimulus measures to boost economic growth and inflation in the Eurozone were less likely and left interest rates and its pace of bond purchases unchanged. Mid-month, the Federal Reserve raised short term interest rates to a range between 0.75 - 1% and indicated that two more rates hikes were likely this year. On March 29 British Prime Minister May formally began the UK’s process of leaving the EU, kicking off many years of Brexit negotiations. The US job report showed that 235,000 non-farm jobs were added in February, the unemployment rate ticked lower to 4.7%, and the labor force participation rate moved up to 63%.
Notable corporate transactions announced in March included the $2.3 billion sale of GM’s European operations to Peugeot and BNP Pribas, the $13.5 billion merger of Aberdeen Asset Management and Standard Life, the $1 billion acquisition of Nimble Storage by Hewlett Packard Enterprise, Intel’s $15 billion purchase of Mobileye, HNA Capital’s $450 million acquisition of a 25% stake in OM Asset Management, Amazon’s purchase of Souq.com for an undisclosed sum, the $4.3 billion sale of Onex’s USI Insurance unit to KKR and CDPQ, American Airlines’ $200 million purchase of a stake in China Southern Airlines, Apple’s acquisition of Workflow for an undisclosed sum, the $3.2 billion sale of Sealed Air’s New Diversey and food hygiene business to Bain Capital, China Energy’s $100 million purchase of a 19.9% stake in Cowen Group, the $13.3 billion sale of ConocoPhillips’ oil sands and western Canadian natural gas assets to Cenovus, MaxLinear’s $662 million purchase of Exar, an asset swap between DuPont’s crop protection business and FMC Corp’s health and nutrition business, the $555 million acquisition of TRC Companies by New Mountain Capital, and the $125 million sale of Sarepta’s Rare Pediatric Disease Priority Review Voucher to Gilead Sciences.
Developed market equity markets were mostly higher in March (see page 8), with the largest gains in Spain (+10.4%), Italy (+8.6%), and France (+5.6%); the worst performing were Japan (-0.8%), the S&P500 (+0.1%), and Canada (+1.1%). US small caps performed in line with large caps, as both the Russell 2000 and the Russell 1000 were up 0.1% (see page 3). IT (+2.6%), Consumer Discretionary (+2.1%), and Materials (+0.5%) were the best performing sectors in March, while Financials (-2.8%), Telecom (-1.2%), and Energy (-1%) were the worst performing (see page 2). Large cap growth (+1.2%) outperformed large cap value (-1%) in March (see page 3). Emerging Market equities were mostly higher in March (see page 9), with the biggest gains in Argentina (+12.8%), Indonesia (+4.3%), and Korea (+4.1%); Brazil (-2.5%), Russia (-0.8%), and Taiwan (+0.5%) were the worst performing.
In currencies, the USD Index was down 0.8% in March (see page 10). The strongest developed market currencies against the USD were the British Pound (+1.4%), Japanese Yen (+1.2%), and Swedish Krona (+0.7%); the weakest were the New Zealand Dollar (-2.6%) and Norwegian Krone (-2.4%). Emerging market currencies were mostly higher against the USD, with the biggest gains in the Mexican Peso (+7.4%), Russian Ruble (+3.8%), and Indian Rupee (+3%) and losses in the South African Rand (-2.3%), Brazilian Real (-0.3%) and Chinese Yuan (-0.3%).
The US Treasury yield curve flattened in March with a backup in rates at the short end of the curve (see page 12). 10 year rates closed the month at 2.39%, unchanged from February month end. Investment grade and high yield credit spreads widened in March (see page 13).
In commodities, the GSCI index was down 3.9% in March (see page 11), with gains in Livestock (+1.2%) and losses in Agriculture (-5.2%), Energy (-4.9%), Industrial Metals (-0.9%), and Precious Metals (-0.5%). Within individual commodities, Natural Gas (+12.2%), Cocoa (+9.8%), and Feeder Cattle (+7.1%) saw the biggest gains, while Sugar (-12.8%), Soybeans (-8.6%), Platinum (-7.9%), and Crude Oil (-7.3%) saw the biggest losses. Gold was down 0.4% for the month.
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