March was a mixed month for global risk assets. Global equities were mixed, with outperformance in large caps, growth, and developed markets, investment grade credit spreads widened, the dollar strengthened, the US yield curve moved lower and inverted, and the oil complex continued its recent rally. Just three months ending its bond purchase program, the ECB introduced new stimulus measures, including a pledge not to raise interest rates before December and a new round of cheap long term loans for banks. The Federal Reserve, meanwhile, indicated at its March meeting that it was unlikely to raise rates in 2019 and that it would slow its balance sheet runoff in May; ahead of the meeting, Treasury volatility hit a record low. The US job report showed that 20,000 non-farm jobs were added in February (the 101st consecutive month of job creation), the unemployment rate fell to 3.8%, the labor force participation rate held at 63.2%, and average hourly earnings rose 1.9% from a year earlier.
Notable corporate transactions announced in March included the $2 billion merger of Instant Brands and Corelle Brands, the $6.8 billion purchase of Mellanox by Nvidia, the $1.7 billion acquisition of Brammer Bio by Thermo Fisher, Uber’s $3.1 billion purchase of Careem, the $300 million acquisition of Dynamic Yield by McDonald’s, the $69.1 billion purchase of Sabic by Aramco, the $15.3 billion acquisition of WellCare by Centene, the $585 million sale of DS Smith’s plastics division to Olympus Partners, the $2.5 billion purchase of Direct ChassisLink by Apollo Global, the $405 million acquisition of Mist Systems by Juniper Networks, the $463 million acquisition of HotelTonight by Airbnb, the $3.5 billion purchase of the YES Network from Disney by a consortium including the NY Yankees, Amazon, Blackstone, and Sinclair Broadcast, IMM Private Equity’s $1.1 billion purchase of Linde’s South Korean assets, CCMP’s $1 billion acquisition of BGIS, the $930 million purchase of Goodnight Midstream by TPG, F5 Network’s $670 million acquisition of Nginx, the $660 million purchase of Osiris Therapeutics by Smith & Nephew, the $890 million purchase of Biogen’s Danish subsidiary by Fujifilm, the $1 billion acquisition of Ayumi Pharmaceuticals by Blackstone, OSB’s purchase of Charter Court Financial for $2.3 billion, Envestnet’s acquisition of PIEtech for $500 million, FIS’ $35 billion purchase of Worldpay, the $1.3 billion acquisition of eFront by Blackrock, Bridgepoint’s $1.2 billion purchase of Kyriba, the $3.4 billion acquisition of Inmarsat by a consortium including Apax and Warburg Pincus, Onex’s $332 million purchase of Gluskin Sheff, Blackstone’s acquisition of Servpro for $1 billion, and ZF Friedrichshafen’s $7 billion purchase of Wabco.
Developed market equities mostly rose in March (see page 8), with the biggest gains in Italy (+3.5%), the UK (+3.2%), and the S&P 500 (+1.9%), and losses in Spain (-0.2%) and Germany (-0.1%). US small caps underperformed large caps, with the Russell 2000 down 2.1% and the Russell 1000 up 1.7% (see page 3). Real Estate (+4.9%), IT (+4.8%), and Consumer Discretionary (+4.1%) were the best performing sectors in March; Financials (-2.6%), Industrials (-1.1%), and Health Care (+0.5%) were the worst performing sectors (see page 2). Large cap value (+0.6%) underperformed large cap growth (+2.8%) in March (see page 3). Emerging market equities were mixed in March (see page 9), with the largest gains in India (+6.4%), the Philippines (+3.7%), and China (+2.4%), and the largest losses in Argentina (-8.5%), Malaysia (-2.4%), and Korea (-2.2%).
In currencies, the USD Index was higher (+1.2%) in March (see page 10). The Japanese Yen (+0.5%) and Swiss Franc (+0.3%) gained against the USD, while the British Pound (-1.7%), Euro (-1.3%), and Canadian Dollar (-1.3%) had the largest losses. Emerging market currencies were mostly lower against the USD, with the largest gains in the Indian Rupee (+2.1%) and Russian Ruble (+0.3%), and the largest losses in the Brazilian Real (-4.2%), Turkish Lira (-4.1%), and South African Rand (-2.9%).
The US interest rate curve moved lower and inverted in March (see page 12). 10 year rates closed the month at 2.41%, down from 2.72% at February month end. US investment grade spreads widened and high yield spreads were little changed in March (see page 13).
In commodities, the GSCI index was up 1.6% in March (see page 11), with gains in Livestock (+5.5%) and Energy (+2.5%), and losses in Precious Metals (-1.8%) and Agriculture (-1.6%); Industrial Metals were unchanged. Within individual commodities, Lean Hogs (+23.7%), Gasoline (+7.8%), and Cotton (+6.8) saw the biggest gains, while Palladium (-10.5%), Natural Gas (-5.5%), and Coffee (-3.8%) saw the biggest losses. Gold was down 1.6% for the month.
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