Guide to the Markets - J.P. Morgan Asset Management

Guide to the Markets

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We are pleased to present 2Q19 Guide to the Markets. The Guide contains analysis of economic and market data through March 31, 2019, which presents a wide range of macroeconomic data which can help short-term fixed income investors assess market risks and position portfolios in the coming quarter. Highlights include:

  • Although slightly distorted by the timing of Chinese New Year, economic data was generally soft early in 1Q as weaker manufacturing, trade tensions and slower consumer demand weight on sentiment. Growth stabilization remained as the key focus for the government, who announced a combination of tax cuts and new infrastructure projects to stimulate demand. Maintaining its dovish policy bias, the People's Bank of China cut the reserve requirement ratio by 100bps in January and continued to keep market liquidity adequate via open market operations throughout the quarter. Market driven interest rates remained on a downward trend during the quarter with treasury bond and Shibor yields hitting multi-year lows. Later in the quarter, optimism regarding a U.S.-China trade deal, combined with slightly better data has boosted investor optimism and helped the Chinese yuan strengthen versus the U.S. dollar.
  • During the quarter, the Reserve Bank of Australia (RBA) left rates unchanged at a record low of 1.50%. However, slower economic growth and muted inflation in the second half of 2018 encouraged the central bank to remove its hawkish bias and revise down its 2019 economic forecasts. Meanwhile the continued weakness in housing and consequent negative impact on business and consumer sentiment have prompted economist to change their RBA outlook—with several now predicting rate cuts. During the quarter, the Australian dollar actually strengthened versus the U.S. dollar while Bank Bill Swap Rate yields declined and the curve flattened as investors priced in potential RBA rate cuts.
  • Singapore’s economic activity during the first quarter slowed with weaker exports and private consumption, and unemployment edging higher. Meanwhile, the fall in oil prices and sluggish wage growth have muted headline and core inflation. Global trade tensions and slower Chinese growth continue to weigh on sentiment. Acknowledging the softer economic backdrop, the government revised down their 2019 gross domestic product (GDP) forecast to 1.5% - 3.5% and increased spending on health and social security programs. While Singaporean dollar strengthened versus the U.S. dollar during the quarter, the Singapore dollar nominal effective exchange rate (S$NEER) declined slightly, allowing Swap Offer Rates (SOR) to increased further and the curve to steepen.

As you consider these important topics, your Global Liquidity Client Advisor will be happy to share our market views and tailor liquidity solutions to best meet your needs.