Scoreboard: Crimean unease

European markets took the brunt of escalating tensions surrounding Crimea’s planned referendum.

Another bout of China pessimism and tensions on the Crimean peninsula dominated market pricing again. Concerns have grown that China’s economy is slowing, perhaps sharply, although the term ‘hard landing’ hasn’t appeared yet. But we normally see this China pessimism flare up once or twice a year.

News is sparse I guess. Crimea is more serious and the stakes are rising again. The G7 issued a statement saying that Russia should give up its territorial ambitions. In the US, Secretary of State John Kerry said that if Russia “annexed” Crimea, sanctions could “get ugly, and fast”. The issue is that the US and Europe want to do everything they can to avoid a potentially embarrassing referendum this weekend. The referendum is more than likely going to show huge support for Crimea to join Russia, which of course makes it very difficult for any government to condemn. It’s hard for a government to say they support and defend democracy -- are champions of freedom -- but then turn around and act deliberately to undermine it. Very awkward indeed.

Equities saw the most action in Europe, which is bearing the brunt of the Crimean crisis. The Dax is off another 1.3 per cent, the CaC is down 1 per cent and the FTSE100 is off 1 per cent. US markets outperformed, but haven’t done much in truth. Just hovered around zero. Initially the S&P500 had put on a couple of points -- just in the black -- but as I write, the index is down 0.1 per cent (1865). The Dow is then off 50 points to 16,301, while the Nasdaq is 0.1 per cent higher (4311). By sector, tech and utilities outperformed, both putting in a decent performance. On the downside were industrials.

Commodities were bid for a change, gold putting on another $21 to sit at $1367 while silver was 2.5 per cent higher. Copper halted its recent price drop and rose 0.2 per cent. Crude had an interesting session on WTI -- the US has decided to release some oil from the strategic petroleum reserve. They said it’s only a practice run for the real thing -- if they ever needed to do that. The government also noted that it had nothing to do with events in Ukraine as they’ve been “planning this for months”. WTI fell 1.8 per cent to $98.24, although Brent was flat at $102.7.

Forex saw the Australian dollar push higher, rising about 40 pips to 0.8992 US cents. Elsewhere, we saw the euro rise about 50 pips to 1.3907, while the British pound was little changed at 1.6619. The yen is otherwise at 102.95.

Rates news saw US Treasuries rally overnight -- the 10-year Treasury yield slipped 24 pips to 2.721 per cent. The five-year yield is at 1.58 per cent and the two-year is at 0.36 per cent.

Elsewhere, the Reserve Bank of New Zealand raised the cash rate to 2.75 per cent from 2.5 per cent, stating that the economy had “considerable momentum”. Policy makers are also worried by New Zealand’s housing boom and had already introduced macro prudential controls to try and take some heat out of the market. The bank’s governor said that “the bank is seeking to ensure that the economic expansion can be sustained”. A good place to start is by ensuring rates don’t get too low in the first place. There wasn’t a lot of data otherwise -- eurozone industrial production fell 0.2 per cent in January after a 0.4 per cent fall.

In markets today, the key Aussie data will be employment at 1130 AEDT. The consensus is that 15,000 jobs were created, while the unemployment rate is forecast to rise to 6 per cent. This afternoon, around 1630 AEDT, we see Chinese industrial production and retail sales. Tonight the key data includes US retail sales, jobless claims and business inventories.

Have a great day…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.