Comment:Equities Respond Positively to Russian Overtures; China Export Increase boosts Asian Markets
May 8, 2014 10:53 am
European equities advanced Thursday with market participants taking heart in Federal Reserve head Yellen’s latest pledge to support the US economy through accommodative monetary policy together with hopes of a de-escalation of the Ukraine crisis.
Yellen on Wednesday said US rates will be kept near zero for a “considerable time” after it ends its bond-buying programme which could be as early as October 2014. That offered markets some certainty regarding upcoming monetary policy by the Fed. Traders were worried that the Fed may suddenly tighten policies and the lack of clarity in forward guidance didn’t help. Yellen’s remarks yesterday however, will go some way in soothing worries about unexpected rate hikes.
Adding further support to market sentiment, Russia’s president Putin called on separatists in Ukraine to delay a planned referendum and said his troops had been withdrawn from Ukraine’s border. This move is widely being seen as risk-positive in markets as it shows Russia attempting to de-escalate the crisis. There are now growing hopes that Russia continues down this path and that this latest move isn’t just a one-off.
Overnight in Asia, stock markets were lifted on better than expected China trade data which showed surplus was bigger than markets expected as exports unexpectedly climbed in April. That’s raising optimism about the world’s second-biggest economy and helping to lift commodity prices with base and precious metals currently adding decent gains.
Across Asia, Japan’s Nikkei 225 average rose 0.9% while Australia’s S&P/ASX 200 climbed 0.8% after a strong Australian jobs report which showed that 14,200 jobs were created by the economy in April, beating forecasts of 8,800.
US stock futures are on the up too – underpinning price action is Yellen’s comments before Congress this week. Yellen’s remarks propped up government bond prices which in turn keep downward pressure on yields. Staying on bonds, German Bund yields are a little firmer ahead of the decision on monetary policy from the European Central Bank.
No change to policy is expected by the ECB today but much of the focus will be on ECB President Mario Draghi who is likely to stay tight lipped on monetary policy given the conflicting issue of improving macro indicators with low-inflation which raises the prospects of disinflation. Draghi however will have to address the recent strength in the euro, which is currently up at around $1.3916. As well as the ECB, the UK’s Bank of England will also be meeting to decide on policy but no change is expected.
At the same time, markets are not expecting further statements from the BOE this week as the Bank will announce its Inflation Report next week which is likely to contain an updated forward guidance.
European equities advanced Thursday with market participants taking heart in Federal Reserve head Yellen’s latest pledge to support the US economy through accommodative monetary policy together with hopes of a de-escalation of the Ukraine crisis.
Yellen on Wednesday said US rates will be kept near zero for a “considerable time” after it ends its bond-buying programme which could be as early as October 2014. That offered markets some certainty regarding upcoming monetary policy by the Fed.
Traders were worried that the Fed may suddenly tighten policies and the lack of clarity in forward guidance didn’t help. Yellen’s remarks yesterday however, will go some way in soothing worries about unexpected rate hikes.
Adding further support to market sentiment, Russia’s president Putin called on separatists in Ukraine to delay a planned referendum and said his troops had been withdrawn from Ukraine’s border. This move is widely being seen as risk-positive in markets as it shows Russia attempting to de-escalate the crisis. There are now growing hopes that Russia continues down this path and that this latest move isn’t just a one-off.
Overnight in Asia, stock markets were lifted on better than expected China trade data which showed surplus was bigger than markets expected as exports unexpectedly climbed in April.
That’s raising optimism about the world’s second-biggest economy and helping to lift commodity prices with base and precious metals currently adding decent gains.
Across Asia, Japan’s Nikkei 225 average rose 0.9% while Australia’s S&P/ASX 200 climbed 0.8% after a strong Australian jobs report which showed that 14,200 jobs were created by the economy in April, beating forecasts of 8,800.
US stock futures are on the up too – underpinning price action is Yellen’s comments before Congress this week. Yellen’s remarks propped up government bond prices which in turn keep downward pressure on yields. Staying on bonds, German Bund yields are a little firmer ahead of the decision on monetary policy from the European Central Bank.
No change to policy is expected by the ECB today but much of the focus will be on ECB President Mario Draghi who is likely to stay tight lipped on monetary policy given the conflicting issue of improving macro indicators with low-inflation which raises the prospects of disinflation. Draghi however will have to address the recent strength in the euro, which is currently up at around $1.3916. As well as the ECB, the UK’s Bank of England will also be meeting to decide on policy but no change is expected.
At the same time, markets are not expecting further statements from the BOE this week as the Bank will announce its Inflation Report next week which is likely to contain an updated forward guidance.
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