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The UK begins the Brexit process


March was dominated by political events on both sides of the Atlantic. In the UK, the Spring Budget absorbed much of the limelight early in the month, as Chancellor Philip Hammond revealed a stronger-than-expected economy alongside a controversial increase in Class 4 National Insurance contributions that was subsequently abandoned. Scotland’s First Minister Nicola Sturgeon stepped up pressure on Westminster to hold a second referendum on Scottish Independence. Finally, on 29 March, the UK kicked off the official Brexit process as Prime Minister Theresa May triggered Article 50 of the Lisbon Treaty. The FTSE 100 Index rose by 0.8% over March as a whole.

US equity prices wobbled during the month and the Dow Jones Industrial Average Index fell by 0.7% as President Trump’s health care plans failed to garner sufficient support. The bill was withdrawn, but its failure undermined investors’ confidence that the President can push through his high-growth policies. Looking ahead, Mr Trump vowed to focus on “big tax cuts and tax reform”. Meanwhile, the White House published a “hard-power budget” that focused on increasing spending on defence and on the controversial wall planned for the US/Mexican border, whilst cutting funding for the environment and the State Department. Elsewhere, the Federal Reserve (Fed) raised its key interest rate by 0.25 percentage points to a range of 0.75% to 1% in March. The increase was widely expected by investors, and was the second rise in three months.

In Europe, incumbent Dutch Prime Minister Mark Rutte managed to retain power in the Netherlands’ General Election, despite concerns that controversial far-right candidate Geert Wilders might manage to triumph. Elsewhere in the region, the French election race took another twist during the month as Presidential candidate Francois Fillon was formally placed under investigation over allegations of financial impropriety. The Dax Index rose by 4% over March, while the CAC 40 Index climbed by 5.4%.

Policymakers at the Bank of Japan (BoJ) voted to hold monetary policy steady at their March meeting. BoJ officials believe that the inflationary backdrop appears to be deteriorating. Japan’s core measure of inflation rose at an annualised rate of 0.1% in January, largely propped up by the yen’s weakness and a rally in the price of oil. In comparison, the BoJ has an inflation target of 2%. During March, the Nikkei 225 Index fell by 1.1%.

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