Comment; Markets Lower After Yesterday’s Rally But Ukraine Tensions Ease
March 5, 2014 8:03 am
Ukraine crisis easing a tad after Russian President yesterday adjusted his stance on Ukraine saying Russia would only take military action as a last resort – earlier Tuesday, Putin pulled back Russian forces from the Crimea region, ending what he called a military exercise. That led to a big rally for Russian stocks and the Rouble which declined sharply on Monday on worries about a full-drawn out war between Western powers and Russia. Market participants are still awaiting the outcome of the between US Secretary of State John Kerry and Russian Foreign Minister Sergei Larov.
Financial markets advanced in Europe and US Tuesday and in Asian markets overnight despite the poor HSBC Chinese composite PMIs falling to 49.8 in February. Aussie GDP beat expectations however, but momentum is still likely to slow on cooling investments in the country, particularly the mining industry. The yen weakened overnight, providing support for the Nikkei 225 index in Japan.
China’s National People’s Congress are to start the annual meeting today with attention likely to be on growth prospects for the country. Official GDP growth target for 2014 has been kept the same as 2013 at 7.5%, with the CPI target at 3.5% – that’s optimistic given that in the face of deteriorating economic fundamentals in China, policymakers still reckon China can remain resilient but the market doesn’t agree, particularly after the poor PMIs out overnight.
Fedspeak yesterday was scrutinised by markets – Fed member Lacker, a notable hawk suggested he sees the first US interest rate rise due early 2015 and wouldn’t oppose a faster rate of tapering. Later in the session, we get US ADP jobs data, a precursor to Friday’s nonfarm payrolls. We also have the Fed’s Beige Book and the ISM non-manufacturing survey .
Closer to home, euro zone services PMI was revised higher to 52.6 in Feb from the initial estimate of 51.7 – the composite PMI was also revised up. Strongest reading since June 2011 and leads to upgrade to GDP forecasts – Germany of course was the driver behind the solid performance, Spain moderated a tough and France still lag-behind. Notably, Italy’s service PMI posted the biggest upside surprise with confidence increasing beyond expectations there. Meanwhile, UK services PMI also recorded a strong gain of 58.2 which is unchanged from January’s reading but the index remains consistent – business and consumer confidence continues to grow pointing to further growth in the UK this year.
Ukraine crisis easing a tad after Russian President yesterday adjusted his stance on Ukraine saying Russia would only take military action as a last resort – earlier Tuesday, Putin pulled back Russian forces from the Crimea region, ending what he called a military exercise. That led to a big rally for Russian stocks and the Rouble which declined sharply on Monday on worries about a full-drawn out war between Western powers and Russia. Market participants are still awaiting the outcome of the between US Secretary of State John Kerry and Russian Foreign Minister Sergei Larov.
Financial markets advanced in Europe and US Tuesday and in Asian markets overnight despite the poor HSBC Chinese composite PMIs falling to 49.8 in February. Aussie GDP beat expectations however, but momentum is still likely to slow on cooling investments in the country, particularly the mining industry. The yen weakened overnight, providing support for the Nikkei 225 index in Japan.
China’s National People’s Congress are to start the annual meeting today with attention likely to be on growth prospects for the country. Official GDP growth target for 2014 has been kept the same as 2013 at 7.5%, with the CPI target at 3.5% – that’s optimistic given that in the face of deteriorating economic fundamentals in China, policymakers still reckon China can remain resilient but the market doesn’t agree, particularly after the poor PMIs out overnight.
Fedspeak yesterday was scrutinised by markets – Fed member Lacker, a notable hawk suggested he sees the first US interest rate rise due early 2015 and wouldn’t oppose a faster rate of tapering. Later in the session, we get US ADP jobs data, a precursor to Friday’s nonfarm payrolls. We also have the Fed’s Beige Book and the ISM non-manufacturing survey .
Closer to home, euro zone services PMI was revised higher to 52.6 in Feb from the initial estimate of 51.7 – the composite PMI was also revised up. Strongest reading since June 2011 and leads to upgrade to GDP forecasts – Germany of course was the driver behind the solid performance, Spain moderated a tough and France still lag-behind. Notably, Italy’s service PMI posted the biggest upside surprise with confidence increasing beyond expectations there. Meanwhile, UK services PMI also recorded a strong gain of 58.2 which is unchanged from January’s reading but the index remains consistent – business and consumer confidence continues to grow pointing to further growth in the UK this year.
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