Scoreboard: Putin calm

Global markets took comfort as the Russian president downplayed the likelihood of further encroachment on Ukraine.

Russia’s President Vladimir Putin formally accepted Crimea’s request to join the Russian Federation overnight. In doing so, he assured Ukraine that would be it -- Ukraine would not be split -- calming concerns that Russian troops conducting exercises on the country's eastern borders would invade.

Naturally, the US said that Russia’s actions were a blatant disregard of international law and threatened new sanctions, though declined to specify what those would be. Putin in turn said the referendum complied with international law, and he noted that Western countries often disregarded international law themselves when it suited them. Further, he said that the West had crossed the line in orchestrating the overthrow of the pro-Russian Ukrainian government earlier this year. Putin also queried why it was OK for Kosovo to secede from Serbia in a vote, but then when Crimea wanted to do the same these kinds of votes were illegal all of a sudden.

As for the market, punters appear to be fairly relaxed about it all. Stocks were bid and gains were decent. I suspect markets took comfort from Putin’s comments that Ukraine wouldn’t be split and the fact that Russia also seemed to be warming to Germany’s idea to place European security observers in Ukraine to monitor things. Sentiment would have also been supported by the data flow -- not so much by actual housing starts, which slipped 0.2 per cent in February, but by a 7.7 per cent rebound in building permits.

Global equities rallied. The Dax was up 0.7 per cent, the CaC rose 0.9 per cent and the FTSE100 0.6 was per cent higher. On Wall Street the S&P500 was up 0.7 per cent to 1871 with about 40 minutes left to trade. The Dow then put on 100 points to 16,348, while the Nasdaq is 1.2 per cent higher (4332). By sector, healthcare, tech and energy stocks were the key outperformers.

Commodity markets saw crude push higher, with WTI up 1.6 per cent at the time of writing to $99.6, although Brent was only 0.3 per cent higher ($106.6). Metals were weaker, with gold down $17 to $1355 as insurance bets continued to unwind. Silver fell 2 per cent, while copper was flat.

Forex news -- after some excitement around the Reserve Bank’s minutes (the Australian dollar was up 40 pips to 0.9107) the local currency really didn’t do much until the US session kicked off. Shortly after the US open, the Australian dollar found a decent bid and pushed 50 pips higher. As I write the unit is at 0.9128. The euro was little changed in the end at 1.3930 on a 50 pip range, while the British pound was about 50 pips lower at 1.6588. The yen is at 101.4.

Rates had a quiet session, with the US 10-year yield down about 1 bp to 2.674 per cent. The five-year is at 1.54 per cent and the two-year yield is at 0.35 per cent. Aussie futures were up five ticks on the threes (97.000) while the tens were down five ticks to 95.905.

Elsewhere, data included the German ZEW survey which showed investor sentiment on the current situation rising -- the index was up to 51.3 in March from 50. Overall economic sentiment soured however, with the index falling to 61.5 from 68.5, though that is still well above average. In the US, consumer prices rose 0.1 per cent in February to be 1.1 per cent higher annually.

In markets today, the SPI suggests Aussie stocks will put on 0.3 per cent. There isn’t a lot of data for Australia otherwise -- just leading indicators and the skilled vacancies index, which are both very minor. Looking abroad, we see British employment data and European construction data while for the US, the FOMC meeting will take centre stage. The decision is due at 0500 (AEDT) tomorrow and it is widely expected that the Fed will taper an additional $US10bn. US current account data is also out.

Have a great day…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.

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