Introduction

March 2023 proved to be one of the most turbulent months for financial markets in recent memory, as the collapse of several regional U.S. banks-most notably Silicon Valley Bank (SVB) and Signature Bank-triggered widespread concerns over financial system stability. These shocks rippled across global markets and forced central banks to delicately balance monetary tightening with financial sector support. Despite high-profile stress events, equities remained resilient in several regions, and policy shifts created new dynamics in fixed income and currency markets.

United States

The failure of SVB on March 10th sent shockwaves through the U.S. financial system, igniting fears of contagion and prompting swift intervention from the U.S. Treasury, Federal Reserve, and FDIC. The Federal Reserve launched a Bank Term Funding Program (BTFP) to prevent a wider banking crisis and guarantee depositor confidence.

Despite the volatility, the S&P 500 ended March up approximately 3.5%, driven by large-cap technology stocks and renewed bets that the Fed would slow the pace of rate hikes. The Federal Open Market Committee raised rates by 25 basis points, bringing the federal funds rate to 4.75–5.00%, but signalled growing caution around further tightening.

Europe

Europe faced its own banking scare as Credit Suisse experienced a crisis of confidence that culminated in its emergency acquisition by UBS, orchestrated by Swiss regulators. Despite the turmoil, broader European equities managed to stabilize by month-end. The Euro Stoxx 50 posted a modest gain of 1.8% for the month.

The European Central Bank (ECB) proceeded with a 50 basis point rate hike mid-month, taking its deposit rate to 3.0%. ECB President Christine Lagarde emphasised the distinction between monetary policy and financial stability tools, asserting the Eurozone banking system remained well-capitalized and resilient.

Asia-Pacific

Asian markets weathered the global banking jitters with relatively less volatility. In China, March saw further signs of post-reopening recovery, with industrial production, retail sales, and fixed asset investment improving. However, consumer confidence remained uneven and property sector concerns lingered.

The Hang Seng Index rose 3.1%, while the Shanghai Composite added 0.7%. In Japan, equities remained stable despite the global headlines, as the Bank of Japan kept its ultra-loose policy in place under outgoing Governor Haruhiko Kuroda. Markets braced for a potential shift under his successor, Kazuo Ueda, who was confirmed by the Diet in late March.

Emerging Markets

Emerging markets were mixed in March. While Latin American equities outperformed, buoyed by commodities and resilient domestic demand, parts of Asia and Eastern Europe lagged amid renewed risk aversion. The MSCI Emerging Markets Index closed the month up 2.7%.

Notably, India's markets rebounded after February's sell-off, with benchmark indices gaining ground as foreign investment inflows resumed. In contrast, South Africa and Turkey saw pressure due to local inflation and political risks, highlighting the need for careful regional exposure management.

Commodities

Oil prices were volatile throughout March, driven by financial instability concerns and shifting demand expectations. Brent crude fell to as low as USD 72 per barrel before recovering to around USD 79 by month-end, supported by reduced supply growth and a softer dollar.

Gold rallied strongly, rising over 8% to end near USD 1,980/oz as investors sought safety amid banking concerns. Industrial metals saw mixed performance, with copper flat on the month and aluminium gaining modestly on hopes of stronger Chinese demand.

Fixed Income & Currencies

Bond markets swung sharply in March as the banking crisis led to a flight to safety. The U.S. 10-year Treasury yield plunged from over 4.0% early in the month to around 3.47% by month-end, marking one of the largest monthly declines since 2008.

Credit markets were volatile, with spreads widening significantly in the banking and high-yield sectors. In currency markets, the U.S. dollar weakened modestly as Fed expectations shifted. The euro and yen strengthened slightly, while the Singapore dollar remained stable, aided by MAS's inflation-fighting posture.

Outlook

March 2023 served as a stark reminder of how quickly sentiment can shift in a tightening cycle. While authorities acted swiftly to contain financial contagion, questions remain about the health of regional banks, the pace of credit tightening, and the broader impact on global growth.

Brightness Capital & Asset Advisory maintains a cautiously optimistic stance, favouring high-quality assets, liquid positioning, and diversified exposures. We continue to monitor monetary policy pivots, credit conditions, and macro data closely as the global economy enters a more complex and fragile phase.