Major equity markets rose during March, boosted by a welcome rally in commodity prices. Over the first quarter of 2016 as a whole, however, many equity markets posted declines, dragged down by geopolitical anxieties, worries over China’s economic outlook, and pronounced volatility in commodity prices. During March, the International Monetary Fund warned that the global economy is at “a delicate juncture where risk of economic derailment has grown”, while the Bank of International Settlements cautioned against a “gathering storm” as investors begin to lose confidence in central banks.
European share indices generally rose during March; however, sentiment was marred by terrorist attacks in Brussels that triggered fresh geopolitical concerns. The European Central Bank policymakers cut interest rates at its March policy meeting and announced that its quantitative easing programme would not only expand from €60 billion to €80 billion, but would also include corporate debt. The Dax Index rose by 5% in March, but dropped by 7.2% during the first quarter; meanwhile, the CAC 40 Index edged 0.7% higher over the month, but registered a quarterly decline of 5.4%.
Debate over the UK’s future within the European Union (EU) continued to rumble on during March. The Bank of England’s Financial Policy Committee warned that uncertainties over the UK’s membership of the EU could increase risks to financial stability ahead of June’s planned referendum. The FTSE 100 Index rose by 1.3% during March, but fell by 1.1% over the first quarter of 2015.
Japan’s economic contraction during the final quarter of 2015 was less pronounced than previously calculated: the country’s economy shrank at an annualised rate of -1.1%, compared with an earlier estimate of -1.4%. Nevertheless, the Bank of Japan released a somewhat downbeat assessment of the outlook for Japan’s economy, warning that expectations for inflation had recently weakened. The Nikkei 225 Index climbed by 4.6% during March, but fell by 4.3% over the first three months of the year.
The US economy expanded by 1.4% year on year during the final quarter of 2015, compared with a previous estimate of 1%. The Federal Reserve (Fed) maintained its key interest rate at between 0.25% and 0.5%; Fed Chair Janet Yellen emphasised the Fed’s intention to “proceed cautiously” before implementing further monetary tightening. The Dow Jones Industrial Average Index rose by 7.1% in March and by 1.5% during the first quarter