The last FOMC meeting left undeniable after-effects on investors’ mind-set. The last two days of trading clearly shows that market participants don’t know where to stand. Equities rallied sharply yesterday afternoon with the S&P 500 climbing more than 1% to around 2,854, gold sliding 1.30% to $1,305 and US yields going nowhere. On Friday, it is a completely different story, investors shifted to risk-off mode and got rid of risky assets and bought treasuries as well as the Japanese yen and a bit of the yellow metal. European equities bore the brunt of the sell-off with the German DAX erasing 0.70%, the Footsie -1.10% - thanks to Brexit’s two weeks reprieve (only) – while the EuroSTOXX 50 gave up 0.95%.
In Europe, the last batch of manufacturing PMIs fell short of expectations. France’s manufacturing PMI printed below the neutral threshold at 49.8 in March, while economists expected a reading closer to 51.4. In Germany, the picture is even gloomier as March manufacturing PMI collapsed to 44.7 compared to 48 expected; this is the lowest reading since August 2012. This doesn’t bode well for economic growth.
We find is quite fascinating that that both soft and hard data are pointing towards a slowdown of the global economy, while at the same time investors keep buying stocks. It looks like things are changing course. Following the publication of the manufacturing PMI, the German 10-year treasury yield quickly dip below 0% this morning. The single currency is free falling and gave up 0.90%. The greenback is rising across the board with the dollar index up 0.25%. Only the Japanese yen managed to edge higher, up 0.25% against the buck.