Dovish Fed Sends Global Yields Lower, But Little Succor For Stocks

Overview: The dovishness of the Federal Reserve sent ripples through the capital markets. US equities reversed initial gains, but Asia Pacific equities edged higher, though Japanese markets were closed for a national holiday. European shares are struggling, as financials and consumer discretionary lead the 0.3% push lower. US shares are also trading with a heavier bias. Yields have come off and the US 10-year yield that had finished last week a little below 2.60% is now testing 2.50%. European 10-year yields are falling three to five basis points and puts the benchmark 10-year German Bund yield below five basis points for the first time since 2016. The US dollar is softer against the Antipodean currencies but is consolidating yesterday's losses against most of the other majors.  

Asia Pacific

The decline in Australia's unemployment rate concealed a deterioration of conditions a few days after the central bank underscored the importance of the labor market. The unexpected fall in unemployment to 4.9% from 5.0% reflected a decline in the participation rate (65.6% vs. 65.7%).  Australia created a third of the jobs forecast (4.6k vs.15k) and there was a loss of 7.3k full-time posts. Similarly, in New Zealand, the optics look good but the details are less inspiring. Growth in Q4 accelerated from 0.3% in Q3 to 0.6%. However, the year-over-year pace slowed to 2.3% from 2.6%, its slowest pace since 2014. 

Investors are closely watching Asian trade figures for signs of a recovery.  South Korea reported that exports for the first 20 days of March fell 4.9% year-over-year.  Here the news is really better than the optics. This decline shows a recovery from the first 10 days when exports cratered nearly 12%.  Imports were off 3.4% after a 17.3% slump in the first 10 days. Separately, after keeping rates on hold as expected (note that Indonesia, Taiwan, and the Philippines also kept policy steady today), Thailand reported an unexpected 5.9% gain in February exports year-over-year. They had fallen 5.65% in January. Imports, on the other hand, imploded, falling 10% after a 14% rise in January. The trade balance swung into surplus. The $4 bln surplus is the second largest since at least the early 1990s. 

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Read more by Marc on his site Marc to Market.

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