Scoreboard: Russian comfort

Russia’s insistence that it won’t encroach beyond Ukraine, plus talk of Chinese economic stimulus, have investors poised for action.

Risk appetite improved on Friday night, helped along by decent data on both sides of the Atlantic. The data wasn’t top tier or anything but it was enough to remind market players that the global economy is improving. In Europe for instance, economic confidence improved in March and the business climate indicator rose to 0.39 from 0.36. Then over in the US, personal income and spending remained robust, both rising 0.3 per cent apiece. Nothing major, but enough.

There’s every chance it could be an even better session for Australian markets today (SPI points to a 0.2 per cent gain). Mainly this is due to a Russian television broadcast on Saturday, where Foreign Minister Sergey Lavrov said that Russia had “absolutely no intentions and no interest in crossing the Ukrainian border”. Lavrov called on Western leaders to calm down and take a valium, or something to that effect. He said Russia wanted order restored in Ukraine -- an independent, federated Ukraine, one where the constitution isn’t changed every time there is a new president (as had been the case in the past). Russia also wanted a neutral Ukraine, that isn’t a member of NATO, and a renewed commitment from Western countries that they would stop trying to force Ukraine into NATO. Discussions between the US and Russia are ongoing in Paris.

Investors should also note of talk doing the rounds that the Chinese government is set to stimulate the economy in some way -- so look out for that. 

Global equities had decent gains. Indeed, over in Europe, the Dax was 1.4 per cent higher, the CaC was up 0.7 per cent and the FTSE100 rose 0.4 per cent. Wall Street underperformed, but didn’t do too badly. At the close, the S&P500 rose 0.5 per cent (1857), the Dow was up 58 points (16,323) and the Nasdaq was up 0.1 per cent (4155).

Rates pushed higher as sentiment improved, and US Treasuries sold off. The US 10-year Treasury yield was 4 bps higher to 2.72 per cent with the 5-year yield at 1.74 per cent and the 2-year at 0.45 per cent. Aussie futures were then off about 3 ticks on the threes (96.94) and tens (95.895).

In commodity markets, gold weakened but moves were small ($1293). Silver then rose 0.4 per cent and copper was 1.6 per cent higher. In the crude space, WTI was up 0.4 per cent to $101.7, while Brent was 0.3 per cent higher at $107.9.

Forex markets saw the Australian dollar off about 20 pips to 0.9243. The euro was unchanged at 1.3747, while the British pound was up just over 40 pips to 1.6661. The yen sits just above target at 102.7.

Elsewhere, US data showed inflation at 1.1 per cent year-on-year in February, unchanged from the month prior. German consumer price data showed inflation at 0.9 per cent annually in March, up from 1 per cent.

In markets this week, the key focus domestically will be the Reserve Bank’s decision on Tuesday at 1430 AEDT. The unanimous expectation is that the RBA will hold rates steady at this meeting, so most of the interest will be on the press releases and what changes -- if any -- the banks will make. There is a view out there that the RBA is becoming very concerned about house price growth, but then seriously, what did it expect?

Other than that, we see TD’s inflation gauge today at 1030 AEDT, followed by the RBA’s credit numbers at 1130 AEDT. RP Data-Rismark’s house price series is out on Tuesday at 1000 AEDT and we see building approvals on Wednesday at 1130 AEDT. Finally for the Australian data we see retail sales and trade data on Thursday, both at 1130 AEDT.

Globally, the key focus will be on the US ISM survey on Tuesday night and of course payrolls on Friday. The expectation is that 190,000 jobs were created in March, while the unemployment rate is forecast to reduce to 6 per cent from 6.7 per cent. The Chinese manufacturing PMI is also market moving and so well worth watching – it comes Tuesday at 1200 AEDT.

Have a great day…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.