Global Growth Concerns Weigh on Risk Assets

US stocks declined while Treasuries rallied strongly across the curve as investors remain focused on global growth concerns.  Yesterday’s release of the March FOMC minutes was highly anticipated by market-participants, but didn’t provide much new insight.  The minutes reinforced that an April hike is extremely unlikely, as “the global economic and financial situation still posed appreciable downside risks to the domestic economic outlook”.  The March minutes also emphasized the asymmetry in the Fed’s ability to respond to inflation, with rates as low as they currently are.  It’s becoming increasingly apparent that the Fed is more comfortable allowing the economy to potentially overheat, overshoot its 2% inflation target and shifting rates up late, rather than risk contributing to derailing the fragile recovery by hiking too early in light of international headwinds.  Policymakers in Europe also made headlines overnight, with ECB VP Constancio reiterating that the European Central Bank is willing to do whatever is needed to pursue price stability.  Both Constancio and ECB Chief Economist Praet said that “helicopter money”, a concept where the central bank gives money directly to the public, is not currently being discussed or considered.
 
Economic data released today showed US jobless claims decreased more than expected last week.  Claims fell to 267,000, down from 276,000 in the prior period.  Claims this month are subject to volatility due to Easter-driven seasonality.  Regardless, the claims number reinforced that layoffs remain low, and continue to point to strong job access. 

All three major US stock index are down in excess of 1%, Treasury yields and swap rates are 3-7 bps lower across all major maturities, and oil is down close to 2%.