March 2018
President Trump’s proposed trade tariffs on steel and aluminium knocked investor sentiment in Asia during March, amid fears of a trade war. The Japanese yen spiked against the US dollar to reach its highest level since the second half of 2016
- Japan’s industrial output rebounded
- Relations between the US and North Korea thawed slightly
- Australia’s economy grew by 2.4% over 2017
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President Trump’s proposed trade tariffs on steel and aluminium knocked investor sentiment in Asia during March, amid fears of a trade war. The Japanese yen spiked against the US dollar to reach its highest level since the second half of 2016; the yen is widely regarded as a “safe haven” currency in unsettled periods, and concerns about the possibility of a trade war undermined investor confidence. Over the month as a whole, the Nikkei 225 Index fell by 2.8%, the Topix Index declined by 2.9%, and the TSE Second Section Index fell by 2.8%.
“Concerns about the possibility of a trade war undermined investor confidence”
Having fallen heavily in January, Japan’s industrial production rallied during February, rising at a month-on-month rate of 4.1% compared with the previous month’s drop of 6.8%. The news boosted optimism towards Japan’s prospects for economic growth. Japan’s labour market remains tight, although the jobs-to-applicants ratio dipped slightly to 1.58 in February.
Having expanded at an annualised rate of 2.8% in the third quarter of the year, Australia’s economy grew by 2.4% over 2017 as a whole, unchanged from its growth of 2.4% in 2016. A slowdown in construction and net exports was mitigated to a degree by improved household consumption. Average earnings strengthened over the period, rising at an annualised rate of 1.1%. Australia’s rate of inflation rose at 1.9% year on year in the last three months of 2017, below the Reserve Bank of Australia’s (RBA’s) target of 2-3%. Policymakers at the central bank left its key interest rate unchanged at 1.5% for yet another month. The ASX All Ordinaries Index fell by 4.1% during March.
Having grown at a quarterly rate of 1.4% in the third quarter of 2017, South Korea’s economy contracted by 0.2% during the fourth quarter. An increase in private consumption was not enough to offset the effects of weaker exports and construction. Over 2017 as a whole, South Korea’s economy expanded by 3.1%. Nevertheless, investor sentiment received a boost in March from signs of improving relations between the US and North Korea and the benchmark Kospi Index rose by 0.8% in March.
During March, 11 countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam – signed the Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP). This pact replaced the agreement previously known as the Trans-Pacific Partnership (TPP), which the US left in 2017.
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