Banking turmoil does not rule out further rate hikes
Market Summary
Last week, investors focused on Fed rates decision and turmoil in the banking industry.
In the United States, index returns vary widely as small-caps join the Dow in negative territory for 2023. The Fed raised official short-term rates by 25 basis points (bps). The benchmark 10-year U.S. Treasury note lift from a six-month intraday low on Friday morning, but the yield still finished modestly lower for the week. Corporate bond issuance trails off amid uncertainty. In Europe, bank shares sell off again, Eurozone composite PMI rose to a 10-month high of 54.1 in March from 52 in the previous month. The Bank of England (BoE) raised interest rates to 4.25% from 4.00%.
In Asia, the yen strengthened, finishing the week at around JPY 130.6 against the U.S. dollar from about JPY 131.8 the prior week. Japan’s inflation remains high, but price pressures ease, the core consumer price index rising 3.1% year on year in February, down from January’s 4.2%. The People’s Bank of China (PBOC) left its benchmark one-year and five-year loan prime rates (LPR) at 3.65% and 4.3%, respectively, for the seventh consecutive month. China’s fiscal revenues fell 1.2% in the first two months of 2023 from a year earlier, while expenditures rose by 7%.
Major News
Germany’s chancellor Olaf Scholz dismisses fears over Deutsche Bank.
TikTok’s chief executive has told hostile US legislators that the viral-video app will be kept “free from any manipulation by any government”, as he struggled to head off a potential US ban.
France has postponed the state visit by the UK’s King Charles III that was due to the escalating protest movement.
Xi Jinping’s Russia trip reduced chance of nuclear war, says EU foreign policy chief.
What Caught Our Attention
Japan's prime minister, Kishida Fumio, endorsed India as the place where the Free and Open Indo-Pacific (FOIP) came into being during his visit to Delhi in March. The FOIP aims to create a democratic counterbalance to China's assertiveness. The two leaders also stressed the progress of their coordination in international diplomacy, with Japan chairing the G7 and India the G20.
Fear of China's assertiveness brings India and Japan closer together, with Japan being a big investor in India's infrastructure development. The Indian and Japanese armed forces exercise together more often, conducting their first joint fighter-jet drills earlier this year. Mr. Kishida promised an additional 5trn yen ($42bn) in Japanese investment over the next five years in India, which will accelerate the infrastructure development of the country.
Source: Kredens Capital, T. Rowe Price, Bloomberg, Financial Times, Wall Street Journal, The Economist, Nikkei Asia
