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Shares in Asia fell more than 2% amid growing fears that a recession is on the horizon, Japan's Topix was impacted the most as the index dropped 2.5% at the close. The Hang Seng, ASX 200 and the Shanghai Composite followed and all fell by at least 1%.

Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 25 Mar 2019. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect  your positions, please take a look at the video. 

Global growth the primary issue right now: The monumental tug-of war between improving financial conditions and deteriorating economic conditions continues. On Friday, it was the latter that took home the points, if only this time around. Both variables truly sit diametrically opposed, and as far as market participants are concerned, which force will prevail remains speculative. It’s written into the mixed-messages markets have been signalling in the last several weeks. It must be said, with the end of last week’s trade, such discrepancies are becoming less pronounced. The dominating concern pertains to the outlook for global economic growth. The world economy’s health is looking worse than previously imagined, and the re-introduction of dovish rhetoric from global central bankers is proving an inadequate remedy.

EU agrees to postpone Brexit until 22 May if MPs approve a deal next week, otherwise the UK will leave by 12 April, a much shorter deadline

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The EU has indicated that Theresa May needs to get backing from parliament on her Brexit deal before they agree to delay the UK's withdrawal from the EU. The Prime Minister is heading to Brussels today for the European Council meeting to try to force an extension in order to avoid a no-deal scenario.

Market action proves it again: this market hinges on the Fed: The US Fed has proven itself as the most important game in town for traders. The FOMC met this morning, and lo-and-behold: the dovish Fed has proven more dovish than previously thought; the patient Fed has proven more patient that previously thought. Interest rates have remained on hold, but everyone knew that was to be the case today. It was about the dot-plots, the neutral-rate, the economic projections, and the balance sheet run-off. On all accounts, the Fed has downgraded their views on the outlook. And boy, have markets responded. The S&P500 has proven its major-sensitivity to FOMC policy and whipsawed alongside a fall in US Treasury yields, as traders price-in rate cuts from the Fed in the future.


The US Dollar sends some asset classes into a tizz: The US Dollar has tumbled across the board consequently, pushing gold prices higher. The Australian Dollar, even for all its current unattractiveness, has burst higher, to be trading back toward the 0.7150 mark. Commodity prices, especially those of thriving industrial metals, have also rallied courtesy of the weaker greenback. Emerging market currencies are collectively stronger, too. This is all coming because traders are more-or-less betting that the Fed is at the end of its hiking cycle, and financial conditions will not be constricted by policy-maker intervention. Relatively cheap money will continue to flow, as yields remain depressed, and allow for the (sometimes wonton) risk-taking conditions that markets have grown used to in the past decade.

Another trade-war headline downs sentiment: There’s some news floating through the wires that sentiment has taken a hit overnight courtesy of some unfavourable trade-war headlines. It’s been reported that Chinese officials aren’t co-operating with their US counterparts, as it applies to certain sensitive elements of trade-negotiations. The S&P500, which had been developing some intraday momentum prior to the release, has retraced throughout trade, consequent to the news. It’s closed flat for the day, but despite this fall, moves in rates and bond markets suggest the fundamentals currently remain the same. The all-important balance between financial conditions and growth expectations is still there, ultimately supporting the bullishly inclined, as markets now prepare for tomorrow morning’s meeting of the US Federal Reserve.


The unresolvable issues: It’s perhaps an assumption alone, but the (very vague) report leaked to the market about trade negotiations surely pertains to one of the well-understood, seemingly intractable issues embroiling the US and China. Those, at its core, unrelated to economics, but to strategic, and somewhat philosophical differences. These are intellectual property theft, currency manipulation, and Chinese military posturing in the Asian region – especially the South China Sea. These differences are relevant because they boil down to brutal power-politics, and an essential clash of ideologies. This isn’t to suggest a trade-deal, and future bilateral cooperation can’t exist between both parties; but that whatever deal is struck, it’s unlikely to put an end to geopolitical tensions.

Join the discussion: "It seems likely to me that what will actually happen here is that Mike Ashley will bid, because aside from anything else, the House of Fraser is not of critical size without combining with Debenhams and is losing money heavily.

As Mr Ashley does not have access to enough luxury brands, so he is having to fill the House of Fraser stores with Sports Direct stock which is badly weakening the House of Fraser brand. He needs to combine Debenhams with the House of Fraser fairly urgently I would say, especially now that Debenhams has signed off the Li + Fung deal which promises a pipeline of decent quality items into its stores."

Lyft, the ride-hailing company and one of Uber's main competitors, has begun its investor roadshow to pitch its Nasdaq listing as it looks to raise $2bn at a valuation of around $23bn. The company suggested a price range between $62 and $68 per share in its filing to the SEC on Monday, and will use the ticker symbol LYFT when it begins trading. This is a first indication of what ride sharing companies could be worth in public markets as we await Uber's IPO in the coming months. 

Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 18 Mar 2019. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect  your positions, please take a look at the video.

Markets trade thin ahead of central bank risks: It’s said that money makes the world go around. And given central bankers control the money of the world, it is they who decide when the turning starts and stops. Described this way, central bankers role in the economy sounds Bond-villain-esque. That’s entirely unfair of course – only fringe-dwellers would suggest they are so malevolent. But recent history, based on experiential evidence, suggests that when it comes to financial markets, the actions of central bankers take primacy over all other considerations. This phenomenon must be a transient thing – a part of some other historical process. All high priests eventually lose their power. For now, though, it feels the age of the central-banker has reached its epoch, with markets dutifully obeying their rule.

Markets pace the margins: The reason for the foregoing expatiation is that financial markets, owing to a dearth of economic and corporate data, have traded quietly in anticipation of several key central bank meetings this week. Naturally, the biggest of them all is Thursday morning’s US Federal Reserve meeting. In preparation for the event, traders are pacing the markets’ fringes. Risk appetite on Wall Street is still rather well supported. Volumes are below average but having broken key-resistance at 2815 on Friday, the clearing of that technical level has invited in some buyers. Rates markets are largely unchanged, although US bond yields have ticked slightly higher across the board, while the US Dollar is relatively steady, albeit well off its recent highs.

A flowless rally: It’s being dubbed the “flowless rally”. Equities are ticking higher, but without the fundamental buying-support one might assume. This is especially so when considering the milestone achieved on Wall Street on Friday. Finally, the 2815 resistance level has tumbled, and the bulls have cautiously, quietly rejoiced. There are yellow flags popping up here and there, however, and that is making participants wary. It goes back to this “flowless rally” business: the latest leg of global stocks big recovery isn’t being supported by investor flows. In fact, investor flows look to have diminished somewhat. The reasoning behind this move is somewhat speculative. The impact of share buybacks is one popular argument. Whatever the cause, confidence isn’t accompanying this rally.


Economic conditions deteriorating: Maybe market participants are still scorned from the market correction in 2018. A bitterness and cynicism stemming from that is understandable. Much of the frustration comes, it would seem, from a widespread recognition that this rally has come in the absence of solid fundamentals. On the contrary, if looking at the macro-outlook, there are more reasons to be bearish than bullish right now. Global growth is (almost) irrefutably slowing, and some of the geopolitical sore-points dictating sentiment, like Brexit and the US-China trade war, are showing little new signs of progress. A major factor keeping this rally alive in riskier assets, perhaps concerningly, is a little case of “fear of missing out”.

Delaying the pain of uncertainty: The pain of uncertainty, when it comes to two of the world’s big macroeconomic issues, looks likely to persist for a little while yet. Two stories, to be elaborated on in a moment, defined market-headlines overnight: a meeting between US President Donald Trump and Chinese President Xi Jinping won’t happen until at least April; while the UK House of Commons has voted overwhelmingly to extend the Brexit-deadline, though with no clear path forward from here. The frustration is palpable, and its apparently resulted in a level of exhaustion for financial markets. After a bit of chop, Wall Street is trading in a cold-fashion, only slightly down for the day, handing the Asian region little inspiration for the day ahead.

The pound rallied to a new high after British MP reject leaving the EU with a no-deal. As the rejection passed by 312 votes to 278, the pound gained 2% against the dollar, reaching new highs for the year of 1.3339, as investor's received the no-deal rejection as good news for the future of the British economy.

Traders see “goldilocks” conditions in US: Both European and US shares rallied overnight. For the latter, the term “goldilocks” has been bandied around. That is: growth in the US, though not as strong as it has been in the recent past, is still solid, while inflation risk is presently low, meaning the US Fed will likely remain in a neutral position. A reminder of this dynamic came in the second of two major inflation releases out of the US this week. PPI data showed a weaker than expected print, following the night prior’s soft CPI numbers. The effect has been static bond yields, a slight lift in the prospects of a US rate cut this year, and a US Dollar that has pulled-back from its highs.

US stocks fail to jump significant hurdle again: Perhaps most significantly for those with a bullish disposition, US equities have responded to the “goldilocks” dynamic in the most enthusiastic way. Once again, the S&P500 has challenged crucial resistance at 2815 – that notorious level at which the market has broken down on nearly four-or-five occasions in the past. Promisingly, as it applies to last night’s trade, the sector responsible for driving the S&P500’s gains is information technology – primarily Microsoft and Apple Inc. Recall, it was the en masse dumping of the tech-giants that led US stocks lower in Q4 last year. It’s hope that their continued recovery may be a bellwether, for the bulls, of further upside to come.

The pound ticked higher after having dropped on Tuesday after Theresa May’s amended Brexit deal rejection. Today’s vote in the UK parliament whether to leave the EU without a deal is unlikely to provide excessive pressure on the sterling in case the proposal is rejected, however downside risk exists.

Financials drag on the ASX: The ASX200 was legged in the final stages of trade yesterday. It was led by a sell-off in major financial stocks, after a media address made by Australian Treasurer, Josh Frydenberg, during which he announced the Liberal government would not pursue the eradication of trailing commissions for financial advisors and mortgage brokers, as prescribed by Kenneth Hayne QC in the final Banking Royal Commission report. It turned what was an otherwise solid day for the ASX200 on its head. Naturally, given their substantial weighting in the index, a bad day for the banks more-often than not leads to a pull-back in the market. That notion certainly proved to yesterday and looks to prove true again this morning.

A good lead, but a weak start: Thus, at time of writing, SPI Futures are pointing a 7-point drop at the open. With half-an-hour left in Wall Street trade, it won’t be for a lack of a positive lead that this will be so. It’s been a reasonable day for US stocks, rallying just over 0.3 per cent, according to the S&P500. Market participants, it would seem, have had hurled back at them, when it comes to the banks, the political risk to the industry, they’d thought, had disappeared following the final report handed down by the Royal Commission. This being the case, the simplest answer for the ASX’s likely sluggish start today is this returning shadow of regulatory uncertainty over the financial sector.

Theresa May has announced that she has secured "legally binding changes" to the withdrawal agreement ahead of the pivotal vote on her deal in the House of Commons this evening. Specifically, the changes mean that the Irish backstop would not "become permanent".

Up, down, turnaround: It’s been a bipolar market of late. Global stocks are moving in unison, and have swung from broad-based losses on Friday, to broad-based gains overnight. US equities are naturally the exemplar and are a responsible for driving overall risk appetite. With an hour left in trade (and as a quick aside, Wall Street closes at 7am AEDT for the next few weeks) the S&P500 is up well over 1 per cent. It’s been a day of relatively low activity. However, breadth is expansive: over 90 per cent of stocks are higher for the session. After last week’s losses, the S&P500 is some way from the key resistance at 2815. The fundamental strength of the market will be assessed by its ability to rechallenge that level.

ASX to hit the ground running: It was topsy-turvy yesterday, as far as the ASX’s behaviour went within the context of the global rally in equities. Unlike during stages of last week, the ASX200 was a thin-cut of red in an otherwise sea of green, when looking at the global equity index map. Australian stocks will join the party this morning, and according to the SPI Futures contract, will bust out of the gate at today’s open with a 34-point rally. Inducing from European and North American trade what we might see today: materials stocks may follow their international counterparts, energy stocks may track a lift in oil, and Australia’s growth stocks in the biotechnology industry should follow US tech’s run higher.

Amid the political uncertainty surrounding Brexit, the Bank of England has advised UK lenders to triple their holdings of liquid assets in the run-up to Brexit to prepare for a forecast market meltdown if the UK leaves the EU without a deal later this month. Banks are also being told to adjust their balance sheets on the assumption that they will not be able to swap sterling for USD.

US NFPs: The final bastion of global economic growth is showing cracks in it walls. Arguably last week’s key-release, US Non-Farm Payrolls disappointed market participants over the weekend, printing well below expectations. It wasn’t a clear-cut, poor print. The unemployment rate dropped to 3.8 per cent and wage-growth climbed to 3.4 per cent. The shocker was the headline number: forecast to reveal a jobs-gain of 180,000, the US economy only added 20,000 last month. It’s given rise to concerns that, given how low the unemployment rate is in the US, and that wages are finally picking-up, the long-thriving US labour market has finally reached full capacity for this economic cycle.

US stocks fall, but losses were limited: That would be bad news for the US and global economy. Despite this gloomy picture painted by NFPs, and an initial knee-**** reaction, traders sought to see through the data. It was a bad day, ending a bad week, for risk assets on Friday – that’s no question. But given that the weak US jobs figures punctuated a series of weak global economic data, which solidified the fear the global economy is sharply slowing, the reaction in markets was fairly contained. Global stocks certainly put in their worst weekly performance for the year. However, Wall Street’s daily losses were contained to a relatively modest 0.21 per cent, if judged by the S&P500’s performance on Friday.

Global tensions reach new heights as Chinese tech giant Huawei files a lawsuit against the U.S, claiming that a law that bans government agencies from buying the company's equipment is unconstitutional. This comes after Huawei's CFO also filed legal proceedings against Canada. Meanwhile, there has been a report that North Korea are moving to rebuild a nuclear missile site, following a break down last week in the summit between Trump and Kim Jong Un. 

Australian data draws global interest: Australia’s remarkably weak growth figures captured attention, both locally and abroad. The numbers conveyed in yesterday’s GDP were truly disappointing. Growth in the final quarter of 2018 was a paltry 0.2 per cent, and after another set of revisions to previous data, the annualized growth rate fell to 2.3 per cent. Each figure was quite an undershoot of expectations: for one, economists were expecting the quarterly number to come-in-at 0.3 per cent in seasonally adjusted terms. Now, on the face of it, this may not seem too bad. However, this estimate had been revised down several times in the week preceding yesterday’s GDP release, from around 0.6 per cent, in response to other underwhelming Australian economic data.

RBA’s dissolving logic: As it stands, the picture the GDP print painted of the Australian economy blows the RBA’s base case out of the water. Recently, the RBA had become candid in its assessment of the (let’s say) “crosswinds” in the domestic economy. So cognizant of the risks, they’d adopted a “neutral” stance to monetary policy moving forward into 2019. But still, their optimism remained: growth would remain strong enough to lead to an even tighter labour market, which would eventually feed into a pick-up in wages growth, and subsequently the inflation and consumption growth long-missing in the Australian economy. It was this view that fundamentally created the bedrock for the RBA’s policy bias and supported their hope for improved local economic conditions.