Global Markets Overview – 3/3/14
By EvaIG Markets Strategist | March 3, 2014 10:57 AM EST
The geopolitical tinder box - Ukraine
Markets have a lot to digest this morning; a geopolitical crisis in Ukraine, China's PMI index beating expectations (which was a surprise) and the start of central bank week. But the biggest talking point is the developments out of Crimea.
Ukraine Peace Deal Halts Violence but Crowds still Angry
The Ukrainian situation is a tinder box in the making; the geopolitical crisis from the Kiev revolution has escalated even further overnight, with the one-day old head of the Ukrainian navy defecting to the pro-Russian self-elected Prime Minister of Crimea. Kiev has reacted by charging the Admiral with treason. There are also reports that Russian troops are surrounding Ukrainian army bases in the region as the Sevastopol Bay sees Russian warships entering the mouth of the port and passing freely into the Russian navy base.
The market to watch is Brent, which has spiked each time more details of the situation emerge. The price of oil has risen a full dollar over the weekend, and it will be interesting to see how the markets behave once Asia sits down to digest the developments from the weekend.
Other markets to watch can be reviewed through history. The possible response to the Ukrainian developments are hard to quantify currently; however during the five-day war (Russo-Georgian War) in 2008, reactions in typical markets were mixed; gold actually contracted over the five days, oil traded sideways, but EUR/USD fell through the floor from $1.532 to $1.493 on the opening day and dropped for the preceding four.
The major difference between the five-day war and the Crimea situations is the cultural and political divides are larger and more pronounced, with greater possibilities for flare ups and conflict over the longer term. On the opening of the currency markets this morning the EUR and the JPY are seeing increased activity as safety is bid up and geographical tensions hit risk.
The other part to this story will be the Russian side; inflation in Russia is over 6% and the likely reaction from the weekend's development is for the US (and its allies) to cut funding to Russia, which will see the Ruble (RUB) come under real pressure. It will have a pronounced impact on the Russian economy as inflation flares up over the coming months.
US futures open at 10am AEDT; all eyes will be on these for how the rest of the full trading day that is March 3 will pan out. Expectations are that with a market that has made an intraday record high on Friday night will use a geopolitical crisis as an excuse to sell off and commodities fluctuate.
Ahead of the Australian open
Offsetting the geopolitical concerns from the weekend was China's surprise with an official PMI print of 50.2. As mild as that is, the spreads in the CNY on Friday suggested the PBoC was looking for a contraction. Several major investment banks were communicating on Friday that the only player that could move the market the way it did was the PBoC and it suggested it was concerned a contraction was emanate. The open in Shanghai will be a major determinate of how the Australian market will trade in the afternoon.
It is also the start of central bank week; the RBA is in clear focus as we await the press statement once more having seen a breakdown of domestic conditions. How much emphasis is placed on the private expenditure numbers from last Thursday will be interesting. It was the worst forward read in 20 years, yet the market is full aware the RBA is not going to move on rates.
So the question becomes; how does the RBA keep the economy flowing if blunt monetary policy tools have been put but in the tool bag? The statement will be watched, with the most amount of interest around as to whether the bank holds the neutral call.
Based on Saturday's close of the futures market we are currently calling the market up 17 points on the 10am bell (AEDT) to 5421, however the opening of the US futures will be what drives the first few hours of trade. The opening of China will then take over in the afternoon; the European futures will also be watched later today as a US press release at 8:00am AEDT stated that Russia has taken complete control of Crimea.
[Kick off your trading day with our newsletter]
More from IBT Markets:
Follow us on Facebook
Follow us on Twitter
Subscribe to get this delivered to your inbox daily
Most Popular Slideshows
- Taylor Swift Named People's Best Dressed Stars Of 2014 [PHOTOS]
- Champions League Results: Barcelona Barely Escapes With A Win, Chelsea Fails To Hold On To The Lead [PHOTOS]
- Jeremy Lin, Kobe Bryant Among The Top 5 Overpaid Players In The NBA (Part 1 - Western Conference)
- Reasons Why Michael Jordan Is Better Than LeBron James [PHOTOS And VIDEO]
Join the Conversation
- Unidentified Benefactor Offers $30M Reward For Identity Of MH 17 Bombers; MAS Criticises Kiwi Author For Suggesting MH 370 Pilot Plotted Death Of Passengers & Crew
- Australian Stock Market Report – Midday September 19, 2014
- Australian Stock Market Report – Morning September 19, 2014
- Global Markets Overview – September 19, 2014
- 2 Reasons Nexus 6 Release Date is Worth the Wait: Android L Data Encryption & Material Design
- Google Release Roundup: New Nexus 6, Nexus 8, Android 5.0 L Launch and Killer Features
- Unofficial ‘Samsung Galaxy Alpha’ Can Now Be Purchased For $700 In The US
- Xperia Z, Xperia ZL, Xperia ZR Android 4.4.4 KitKat Update Guide
- iOS 8 Jailbreak Release Update: Pangu Devs Will Outrace Evad3rs in Rollout of iPhone 6, iPad Unlocker
- Canada Consumer Alert: Costco No Longer Accepting American Express Cards Starting Jan 1
- Sony Xperia E3 vs. Moto G (2014) – Specifications, Features And Price Showdown