Scoreboard: Russian reprieve

Restrained sanctions on Russia consoled global stocks, while US industrial production surged.

The US and Europe placed sanctions on Russia as promised, but the targeted nature of those sanctions (confined to 11-13 people) was a clear relief to markets. Equities were bid and bonds sold off. The US and Europe did state however, that sanctions could intensify if Russia didn’t change course, although most European nations appear reluctant to pursue sanctions aggressively and so escalate the crisis. That’s understandable, given a clear majority of Crimeans actually want to re-join Russia. Not to mention the difficulty Western governments have trying to explain to the people who vote for them, why they should undermine that. Weapons of mass destruction perhaps.

At this point, Crimea has made a formal request join the Russian Federation and the Russian President Vladimir Putin will address parliament tonight on the issue. Russia’s main news agency reports that the address will include an acceptance of Crimea’s request. More broadly, Russia’s proposed resolution to the crisis includes an acceptance of the referendum, guarantees from the UN security council that Ukraine will remain neutral, a rewriting of the Ukrainian constitution to give regions more autonomy and they want to make Russian a second official language. Russia noted that they told the West about these proposals a week ago but they were rejected.

Outside of the Crimean crisis, US economic data would have aided a more positive tone. US industrial production surged 0.6 per cent in February and the Empire manufacturing index pushed higher as well (March data) to 5.61 from 4.48.  

Global equities rallied, with the Dax was up 1.4 per cent, while the CaC rose 1.3 per cent and the FTSE100 0.6 per cent. On Wall Street, the S&P500 was up 0.9 per cent to 1857 with about 40 minutes left to trade. The Dow then put on 175 points to 16241, while the Nasdaq is 0.9 per cent high (4283). All major sectors pushed higher, with industrials and tech stocks the key outperformers.

Commodities were generally weaker with gold down $12 to $1366 as insurance bets unwound. Silver fell 1 per cent, while copper was flat. On the crude front, WTI fell 0.9 per cent ($98.02) while Brent slumped 1.9 per cent ($106.2).

For rates, US Treasuries sold off a bit with the 10-year yield up about 4 bps to 2.965 per cent. The 5-year is at 1.57 per cent and the 2-year yield is at 0.36 per cent. Aussie futures were little changed on the 3s (97.065) while the 10s were down 3.5 ticks to 95.91.

Forex markets took the euro a little higher as tensions in Europe eased, but it was only a little over 20 pips to $US1.3923. Sterling was little changed at $US1.6636 while the Australian dollar is 35 pips higher at $US0.9086. Yen is at $US101.7.

Elsewhere, data was light. In the US, the NAHB housing market index rose to 47 in March from 46, while in Europe, consumer price inflation dipped to an annual rate of 0.7 per cent from 0.8 per cent in the final February estimate.

In markets today, the SPI suggests Aussie stocks will put on 0.4 per cent. Other than that we get the Reserve Bank’s minutes at 11.30am AEDT. Not a lot we can learn. The board has stated it’s on hold and recent economic data should rule out any dovish commentary or a return to an unreasonable focus on the exchange rate. Chinese property prices follow at 1230 AEDT, while tonight the key data includes the German ZEW survey, US housing starts and CPI data.

Have a great day.

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