The T. Rowe Price Global Markets Monthly Update for March 2023 reveals that equities recorded generally positive but widely divergent returns, as turmoil in the banking sector in the U.S. and Europe affected interest rate and growth expectations. Inflation showed signs of cooling in several major economies, while the UK experienced further acceleration in price pressures.
According to the T. Rowe Price Global Markets Monthly Update for March 2023, equities saw varying results across the world due to the banking turmoil in the U.S. and Europe, which led to lower interest rate and growth expectations. While the decline in short-term U.S. Treasury yields was particularly pronounced, the Treasury yield curve remained inverted, possibly signaling an upcoming recession.
Inflation appeared to be cooling down in the U.S., Japan, China, and most of Europe, while the UK experienced an acceleration in price pressures. The banking sector's struggles impacted smaller-cap, value-oriented shares, especially regional bank stocks in the U.S., while providing a tailwind to large-cap growth stocks through lower Treasury yields.
In Europe, shares fell in local terms amid concerns triggered by strains in the banking industry after the collapse of two U.S. regional lenders and the takeover of Credit Suisse. Banking stocks tumbled as fears of counterparty risk put pressure on shares. European government bond yields initially rose due to elevated inflation data but later dropped as investors sought traditional safe-haven assets.
The European Central Bank (ECB) raised its deposit rate by half a percentage point to 3.0% to curb elevated inflation. The Bank of England (BoE) also increased interest rates to 4.25% from 4.00% in response to a surprise surge in inflation.
In Japan, stocks generated a positive return in March despite turmoil in the global banking sector. The Bank of Japan (BoJ) made no changes to its monetary policy at the final meeting chaired by outgoing Governor Haruhiko Kuroda. Japanese inflation slowed, with the core consumer price index rising 3.1% year on year in February, down from January's 4.2%.
Chinese stocks rallied in hopes that Beijing would maintain its accommodative stance to offset global banking turmoil. China set an economic growth target of around 5% for 2023 at the National People's Congress. The People's Bank of China left its benchmark one-year and five-year loan prime rates unchanged for the seventh consecutive month.
Overall, the T. Rowe Price Global Markets Monthly Update highlights the mixed results in global markets in March 2023, with a backdrop of banking turmoil and cooling inflation in many major economies.
