Indices 

During the quarter, the technology-heavy Nasdaq Composite increased by over 16%, whereas the S&P 500 Index, which represents the broad market, only rose by around 7%. However, the large-cap Dow Jones Industrial Average, which has a narrow focus, experienced only a slight increase. Despite a calm week due to less macroeconomic data, the indices still reported significant gains, indicating another bullish market.

As concerns about financial instability lessened, shares in Europe saw a rally. The pan-European STOXX Europe 600 Index ended up 4.03% higher in local currency terms. Major stock indices, such as Germany’s DAX, which rose by 4.49%, and the Swiss Market Index (SMI), which gained 4.41%, also reported strong gains. The UK’s FTSE 100 Index increased by 3.06%.

Forex

The Dollar Index confirmed on Friday that it was on track for a third consecutive weekly decline, with a decrease of over 2% in March. This was due to the investors being spooked by the Fed’s rate-tightening cycle coming to an end. The latest CPI report indicated that Eurozone inflation slowed down in March, reaching an over-year low of 6.9%, as energy prices dropped for the first time in two years. However, the core index accelerated to a fresh all-time high of 5.7%. Despite the recent banking turmoil and the risk of recession, ECB President Lagarde stated earlier this month that the central bank is determined to get inflation back on target, without making any “trade-offs.”

The Japanese Yen saw a significant decline in its value last week, indicating a shift away from being a safe-haven currency. The sharp increase in US indices supports the idea that investors are withdrawing from safe-haven currencies and instead investing in the growth of the US equities market.

Macro

According to a preliminary estimate, annual consumer price growth in the euro area decelerated to 6.9% in March from 8.5% in February as energy costs declined. This result fell below the consensus forecast of 7.1%. However, the core rate that excludes volatile food and energy prices rose slightly to 5.7% from 5.6% in February. In February, the unemployment rate remained stable at 6.6%.

BoE Governor Andrew Bailey affirmed in a speech that recent banking industry issues would not divert the central bank’s attention from inflation. While he acknowledged “big strains” in the global banking system, he noted that UK lenders were resilient and capable of supporting the economy.

The U.S. core (excluding food and energy) personal consumption expenditure (PCE) price index for February came in at 4.6%, surpassing the consensus estimate of 4.7%. The core PCE is the Federal Reserve’s preferred measure of inflation. Although the February 2023 reading fell below the recent high of 5.4% recorded in February 2022, it still exceeds the Fed’s 2% long-term inflation target.

In the last quarter of 2022, the American economy grew at an annualised rate of 2.6%, slightly lower than the initial estimates of a 2.7% increase. Consumer spending increased by 1%, down from 1.4% in the second estimate, as spending on services grew much less than previously estimated (1.6% vs. 2.4%).