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BoJ Tankan Survey Paints a Gloomy Picture

BoJ Tankan Survey Shows Business Sentiment Down

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Sentiment among Japanese manufacturers and businessmen in other sectors turned more pessimistic in March due to the strong yen and slowing global trade.

On Friday, the Bank of Japan released the results from Tankan headline diffusion index survey which showed that businesses were affected by the recent strengthening of the yen and the slowdown in the global markets. The main index of the quarterly survey which measures sentiment among the large manufacturers showed an increase of 6, down from 12 in December, and missing forecasts of 8. Non-manufacturers also had a negative outlook with the survey showing a dip from 25 in December to 22 in March, below estimates of 24. The deteriorating sentiment in the said sectors has raised speculation that Japan might have been in a mild recession in the first three months of the year, raising prospects that the Bank of Japan might move in April to address the slump by announcing further expansion to its monetary base. The markets are currently pricing in an additional 10 trillion yen to be added to bring the BoJ’s QQE from the current 80 trillion to 90 trillion yen.

Gold Closes Q1 of 2016 with Strong Gains

Gold prices posted one of the strongest quarterly gains in over a decade as prices closed with quarterly gains of over 16.0% in the first three months of the year. Uncertain monetary policy and a number of central banks in favor of negative interest rates sent the precious metal higher as investors shunned the risky assets in favor of the safe haven. However, the month of March saw gold prices close with declines of 0.48% following a brief rally to a 12-month high at 1284.41. With the markets looking ahead to the second quarter, it is likely that monetary policy and most importantly investor risk appetite will likely see gold prices being well supported.

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Retail Sales in Australia Remained Flat in March

The Australian dollar got off to a weak start as retail sales were flat in March against expectations of a 0.40% increase, while Australia's inflation gauge released by Melbourne Institute suggested that the quarterly CPI was subdued in Q1 of 2016.

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US Labor Market Remains Strong in March

Braving the economic headwinds and the global slowdown, the US labor market continued to surge ahead at a healthy pace in March. The US economy added 215k jobs on a seasonally adjusted basis in the month while the unemployment rate ticked higher to 5.0%. The March jobs report keeps the Federal Reserve on track for its rate hike sometime during this year. The largest gains in the labor market came from retail, construction and healthcare. The manufacturing sector lost 29,000 jobs, coming off February's job loss of 18,000. Previous revisions saw February's payrolls being revised higher from 242K to 245K. Average earnings also saw a boost in March, increasing 0.30% on a month over month basis.

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Global Manufacturing PMI's Turn Positive

Manufacturing PMI data from various economies around the world released on Friday pointed to a broad pickup across the board in March. Manufacturing activity in China grew for the first time in nearly 9 months, rising above the 50-level showing an expansion. In the Eurozone, the manufacturing PMI increased from 51.2 in February to 51.6 beating the preliminary estimates of 51.4, while in the US, the ISM manufacturing PMI increased from 49.5 to 51.8, showing an expansion in the sector for the first time since November of 2015. The exception was of course Japan which continued to show a contraction, while the UK's PMI was 51.0, slightly up from 50.8 in February. 

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