Daily Market Reports | Mar 31 2014
By Greg Peel
Putin has told Obama he wants the Ukraine to become a federation of self-governing states, allowing autonomy for individual regions and ethnic majorities. In other words, Putin wants ethnic Russians in the Ukraine to have their own governments and choose their own allegiances. He also wants assurances over the Moldovan state of Transnistria, and he wants Ukraine to be blocked from joining NATO. Then he will withdraw the 40,000 troops amassed on the Ukraine border. As the two leaders spoke, Crimea changed its clocks to Russian time.
However this proposal might play out, global markets have decided the Ukraine is less of a geopolitical risk than it might have been now diplomacy is heading off invasion. There may be some lingering doubt in the oil market but otherwise, markets have moved on. They have moved on to China where on Friday Premier Li Keqiang suggested Beijing was ready to support a cooling Chinese economy, likely through speeding up government infrastructure projects. China has now taken over the US’ “bad news is good news” playbook, such that any further weakness in Chinese data releases will be seen as positive as they increase the likelihood of swift action from Beijing. This week’s PMI data releases will be testament.
With this news from China on board, and knowing Putin had asked to speak to Obama, Wall Street began in a positive mood on Friday. The Dow rallied 150 points early in the session, helped along by data releases.
Personal spending increased by 0.3% in the US in February, ahead of 0.2% expectation. The good news was offset by a revision to the January number, down to 0.2% from an earlier 0.4%. Incomes grew 0.3% in February as expected. Michigan Uni’s gauge of consumer sentiment ticked up to 80.0 from 79.9 a fortnight ago but is down from 81.6 at the end of February.
By midday Wall Street began to run out of puff. Last week featured volatile sessions ending either up or down but achieving mostly net sideways, albeit the S&P 500 was down for the week. On Friday the Dow closed up 58 points or 0.4% while the S&P gained 0.5% to 1857 and the Nasdaq rose 0.2%.
The US dollar index was steady on Friday at 80.14 as was gold at US$1294.80/t. The US ten-year bond yield, on the other hand, jumped 4 basis points to 2.71% in contrast to the trend of the week. Fed chair Janet Yellen will speak tonight and while no one expects her to admit an error and withdraw her “six months” remark, she may well clarify or water down, which is enough to encourage bond traders to square up.
Base metals were mixed on Friday, with aluminium and copper posting better than 1% gains while nickel fell 1.5%. Spot iron ore was unchanged at US$112.30/t. The oils each rose slightly, with Brent up US34c to US$107.98/bbl and West Texas up US39c to US$101.67/bbl.
The Aussie is off slightly at US$0.9252 and the SPI Overnight rose 12 points.
It’s a big week ahead for global economic data.
Tomorrow is the first of the month and thus manufacturing PMI day, with numbers due from Australia, China (both Beijing and HSBC), the eurozone, UK and US. Thursday sees the equivalent round of service sector PMIs.
It’s jobs week in the US. The Chicago PMI is out tonight and the Fed chair, as noted, will make a speech. Aside from PMIs, tomorrow sees construction spending and vehicle sales, Wednesday factory orders and the ADP private sector jobs number and on Thursday it’s the trade balance. Friday it’s non-farm payrolls.
Japan will issue PMI data and industrial production this week along with the Tankan Survey for the first quarter. Japan has managed to stay out of the news of late but expectations are for some sort of policy development there as well, while the eurozone argues over rate cuts/QE. A flash estimate of eurozone inflation is due tonight, which is the critical factor.
It’s also busy in Australia. Today sees private sector credit, new home sales and the TD Securities monthly inflation gauge while tomorrow it’s the manufacturing PMI and the monthly RP Data-Rismark house price index. The RBA will meet tomorrow, leave rates on hold, and probably suggest the Aussie is too high.
On Wednesday it’s building approvals, then on Thursday retail sales and the trade balance along with the Services PMI. Enjoy the last of the warm evenings – Daylight Savings ends this weekend.
Rudi will appear on Sky Business today at 11.15am, on Wednesday at 5.30pm and on Thursday at noon and again between 7-8pm for the Switzer Report.
For further global economic release dates and local company events please refer to the FNArena Calendar.
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