Global Markets Overview – 3/5/14

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By Evan Lucas, IG Markets Strategist | March 5, 2014 11:24 AM EST

The National People's Congress

The beginning of the annual National People Congress in Beijing today will be the first major forum since announcing some of the largest policy changes in three decades at the Third Plenum in late October last year.

Premier Li Keqiang is due to address the congress at 10:30 AEDT to deliver the 'work report'. Most of his opening address will be standard political statements, however there are likely to be some announcements from the speech that will be of market relevance.

There are three major themes to watch out for:

1.       2014 GDP growth targets

2.       Reform agenda - particularly around financial, healthcare and environmental policy

3.       The momentum in the economy from the central government's perspective

The address is likely to cover GDP outlook.  The central government has yet to really outline where it sees Chinese GDP in 2014, and having seen China's policy makers managing to change the perception that an 8%+ headline growth rates is needed to prevent unemployment, his announcement could see GDP growth in 2014 in the low seven bracket.

Having seen seven consecutive sub-eight quarter prints officialdom are turning 'quality' rather than 'quantity', as slower but more labour-intensive growth is seen as the future.

This all feeds into China's reform agenda; structural growth problems are already under review and wasteful investment and capital management are now receiving more attention rather than output performance.

Managers are now being asked to invest in more structured and efficient manners, and considering the fiscal policies seen over the past six months (wringing out of speculative lending, credit market levers being pulled), and what was announced at the Third Plenum, the NPC is likely to see rubber stamping of policies that will implement for fiscal reform.

Other reform agendas that are likely to receive attention include healthcare, anti-pollution measures and the newly altered urbanisation policy. We are also looking to see if fiscal policy change extends to state-owned enterprises (SOE).

There has been growing momentum behind SOE dividends and increased foreign ownership. At the Third Plenum we learnt the party is looking to increase profit payout from approximately 10% to 30% over the next six years and that foreign ownership could rise from single digits to low double digits. Currently there is no timeline for the roll out of this policy however expectations are for growth to come sooner rather than later.

Economic momentum will be key to China's 2014 and will be key to Australia's continued growth.

Ahead of the Australian open 

The much anticipated fourth quarter GDP print will be released today, growth in the fourth quarter is expected to grow by 0.7% for a year-on-year number of 2.5%. One thing that I am watching however has been the large increase in exports at the back half of the year and energy and material exports were at record levels. This could see the GDP print beating expectations, and considering the AUD remains well bid at 89 cents the market seems to be expecting this as well.

We are currently calling the market up 45 points on the 10am bell (AEDT) to 5445 as Russia steps back from its current military operations in the Crimea which saw global market having a nap back. This will put the ASX back at the 5450 resistance level.

Having seen the bulls being exhausted each time it has tested this level, the GDP number and other factor are going to have to work very hard to keep the momentum going.

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,443.90

44

0.81%

Japan 225 (Nikkei)

14,953.80

233

1.58%

Hong Kong HS 50 cash (Hang Seng)

22,886.80

229

1.01%

China H-shares cash

9,848.40

72

0.74%

Singapore Blue Chip cash (MSCI Singapore)

353.50

2

0.59%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

16,392.00

-4

-0.02%

US 500 (cash) (S&P)

1,872.81

-1

-0.06%

UK FTSE (cash)

6,818.00

-6

-0.08%

German DAX (cash)

9,560.90

186

1.98%

Futures Markets

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

Dow Jones Futures (March)

16,381.00

202.50

1.25%

S&P Futures (March)

1,871.38

24.75

1.34%

ASX SPI Futures (March)

5,447.50

50.00

0.93%

NKY 225 Futures  (March)

14,962.50

260.00

1.77%

Key inputs for the upcoming Australian trading session (Change are from 16:00 AEDT)

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

AUD/USD

$0.8951

0.0018

0.20%

USD/JPY

¥102.235

0.560

0.55%

Rio Tinto Plc (London)

£33.90

0.40

1.19%

BHP Billiton Plc (London)

£19.19

0.14

0.73%

BHP Billiton Ltd. ADR (US) (AUD)

$38.31

0.95

2.54%

Gold (spot)

$1,334.70

-15.85

-1.17%

Aluminium (London)

1770.00

48.75

2.83%

Copper (London)

7049.00

81.00

1.16%

Nickel (London)

15125.0

425.00

2.89%

Zinc (London)

2119.50

51.75

2.50%

Iron Ore (62%Fe)

116.80

-0.90

-0.76%

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(Photo: / )
UK Prime Minister David Cameron and Chinese Premier Li Keqiang on China trade mission (UK Govt)
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