The failure of Credit Suisse rocked investment confidence, pressuring equity returns for the month. On the other hand, the ECB is still expected to advance their monetary tightening agenda, driving the Euro 2.49% higher against the Dollar in March. In the month of March, the STOXX 600 index lost 0.71% (1.75% higher in US$ terms).

The economic situation in Europe remains mixed, weakness in manufacturing was balanced out by the robust services demand. Sentiment was weaker, but hiring activity remains strong, inflationary pressures remain elevated. Confidence in the banking system was also hit, as Credit Suisse ended up taken over by rival bank UBS to avoid a systemic event. Overall, the economy outlook is still full of uncertainties, while the fundamentals have been better than originally expected, further growth and upside for the economy is likely relatively limited in the short term, and the further risks arising from financial events are not to be overlooked. 

Henceforth, our view on the European market is largely unchanged, we are still conservative on the equity market, and would prefer fixed income at the current price levels. Although the market had slightly corrected in March, we expect the equity upside in the short term to be limited. The sticky core inflation will also force the central bank to tighten monetary policy further, which ECB had already made clear its intention of continuing, pressuring the equity market and the physical economy further. Before the core uncertainties and headwinds ease, we would not recommend overweighting European equities in the short term.