Daily Market Color

Uneventful End to Volatile First Quarter

US stocks and Treasuries both rallied a few basis points on the last trading day of the first quarter as investors remained cautious ahead of tomorrow’s payrolls report.  2016 so far has been a volatile one for global financial markets, featuring a distinctively different tone in the first half of Q1 than the second half.  Concern over slowing growth in China and falling oil prices sparked a sell off in equities and emerging-market currencies for the first six weeks of the year, before global central banks stepped in and helped restore confidence.  The dollar is on track for its worst quarterly performance in over five years as the Fed has leaned more dovish than expected, while gold is headed for the largest three-month gain since 1986.  At the same time, global bonds are off to their best start of a year in 20 years.

Data released today showed the number of Americans applying for unemployment benefits unexpectedly rose last week to a two-month high, but a decline in layoffs in March suggests the health of the labor market is still solid.  Claims increased 11,000 to 276,000, but remain well below the 300,000 threshold typically associated with a healthy labor market for the 55th consecutive week, the longest stretch since 1973.  Tomorrow’s nonfarm payrolls report is expected to show another month of solid job gains (+205k est.), but the Fed is likely to be more focused on wage growth rather than # of jobs added at this point.
All three major US stock indexes are in the green albeit around +0.25%, while Treasuries yields and swap rates are 2-5 bps  lower across all major maturities.

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