Despite concerns about a possible banking crisis in the US, equity markets performed quite well during March with the US market advancing a healthy 3.6%. Firmer bond yields gave some valuation relief to the technology sector which rallied 9.5%, outperforming the other major US indices. The Australian market was more subdued improving by just 0.2%. The ASX gold sector was a standout advancing by 19% on the back of an 8% rise in the physical gold price, reinforcing its value in times of financial stress. European markets were 1% higher while China bounced back from its decline last month to improve 4.3%.
Both the RBA and US Fed increased cash rates by 25 basis points as expected, reinforcing their determination to break the back of inflation. This prompted a rally in bond markets with Australian 10-year government bond yields declining by 56 basis points and US 10-year treasuries falling by 42 basis points. At their meeting in early April, the RBA decided to pause their tightening schedule to assess the impact of rate rises thus far on the economy, however they are likely continue hiking rates in coming months. While inflation has fallen it remains stubbornly high, and pipeline wage pressures from a tight labour market will keep inflation higher for longer.
Amongst the bulk commodities, iron ore was flat while fossil fuel commodities were weaker with coal down 8% and oil 4.3% lower. The AUD was slightly weaker against the greenback closing at just over US 67 cents.