March 2015

• Global markets delivered mixed performance in March 2015 as stronger expectations for U.S. interest rate increases contrasted with continued monetary easing in Europe and Asia.
• European equities remained among the strongest performers, supported by the launch of the European Central Bank's quantitative easing programme and a weaker euro.
• The U.S. dollar strengthened significantly, placing pressure on commodity prices and many emerging market currencies.
• Japan and Europe benefited from aggressive policy support, while emerging markets experienced divergent returns depending on economic fundamentals and commodity exposure.
• Oil prices remained volatile as investors monitored supply dynamics and the impact of lower energy investment.
• Government bond yields stayed near historic lows across most developed markets, reflecting subdued inflation and ongoing central bank intervention.

Asia (ex. Japan)

Asian markets outside Japan produced mixed returns during March as investors balanced supportive domestic policies against concerns over slowing Chinese growth and a strengthening U.S. dollar. Chinese equities advanced strongly, driven by expectations of additional stimulus and increased participation by domestic retail investors. Authorities continued to indicate their willingness to ease monetary conditions to support growth and infrastructure investment.

India remained relatively resilient as lower inflation and reform expectations sustained positive sentiment. Elsewhere, export-oriented economies such as South Korea and Taiwan faced headwinds from weaker global trade and currency volatility. Lower oil prices continued to benefit many Asian economies by reducing import costs and improving household purchasing power.

Europe

European equity markets continued to outperform in March as the European Central Bank formally began its sovereign bond purchase programme. The policy injected substantial liquidity into the financial system, weakened the euro and improved investor confidence in the region's recovery prospects.

Economic indicators showed tentative signs of improvement, particularly in business sentiment and credit conditions. Peripheral bond yields remained near record lows, and exporters benefited from the more competitive currency. Political negotiations involving Greece remained a source of uncertainty but did not materially disrupt broader market performance.

United States

U.S. equities were mixed during March as investors adjusted to changing expectations regarding the Federal Reserve's first interest rate increase. The central bank removed the word "patient" from its policy statement but emphasised that future tightening would be gradual and dependent on economic conditions.

Employment growth remained robust, although inflation stayed subdued and manufacturing activity softened due to the stronger dollar and weaker energy investment. Treasury yields declined after the Federal Reserve adopted a more cautious tone than many investors had expected.

United Kingdom

UK equities produced modest gains in March, supported by resilient domestic demand and low inflation. Falling fuel prices continued to boost real incomes, while employment and wage growth improved gradually. However, uncertainty ahead of the May general election contributed to some investor caution.

The Bank of England maintained its accommodative stance, with inflation near zero and interest rates unchanged. Sterling was relatively stable, though expectations for future tightening remained subdued. Gilt yields moved broadly in line with other developed bond markets.

Japan

Japanese equities advanced further in March as monetary stimulus, improving corporate profitability and pension fund inflows continued to support the market. The weaker yen enhanced export competitiveness, while governance reforms encouraged companies to focus more on shareholder returns.

Economic data suggested a gradual recovery in domestic activity, although inflation remained below the Bank of Japan's target. Investors remained confident that policymakers would provide additional support if progress toward reflation slowed materially.

Emerging Markets

Emerging markets experienced varied performance in March as a stronger U.S. dollar and shifting interest rate expectations created pressure on currencies and capital flows. Commodity exporters faced continued challenges, while countries with reform momentum and lower inflation attracted selective investor interest.

India remained a standout performer, while several Latin American markets lagged amid weaker growth and political uncertainty. China continued to play a central role in investor sentiment, with policy easing helping to offset concerns over structural economic deceleration.

Commodities

Commodity prices remained under pressure during March as the strong U.S. dollar and abundant supply constrained any meaningful recovery. Oil prices fluctuated within a broad range as investors weighed declining North American drilling activity against persistent global oversupply.

Gold prices weakened as expectations of eventual U.S. interest rate increases reduced safe-haven demand. Industrial metals were generally soft amid concerns about Chinese demand, while agricultural commodities were mixed depending on weather conditions and evolving crop forecasts.