Global Markets Overview – 3/14/14

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By Stan Shamu, IG Markets Strategist | March 14, 2014 11:20 AM EST

After having seen an improvement in sentiment yesterday, it seems we are back to square one with renewed China concerns and Ukraine tension ramping up. China data was releases post local trade and this set the tone for overnight trade. Industrial production slowed significantly at just +8.5% which was well below consensus of +9.5%. Retail sales and fixed asset investment data also missed estimates and analysts feel the combined impact of these readings points to a high likelihood of a big GDP drop for Q1. Another school of thought suggests that the pollution fight has resulted in a lot of plant closures which would ultimately weigh on data.

There was also some data out of the US with retail sales and unemployment claims both coming in ahead of expectations. This to an extent supported the US dollar against risk currencies. However, it was a different story against the yen as risk aversion ramped up and resulted in investors flocking to the safety of the yen. USD/JPY dropped from around 102.80 all the way down to 101.60. This sees the pair approaching March 3 lows which were printed when the situation initially kicked off. With Ukraine/Russia tension just not easing at all and heading into the referendum, fears the situation will escalate are keeping investors risk-averse. Yen strength will see Japan underperform the region at the open today. We are currently calling the Nikkei down a whopping 2.7% to 14,418. It's a fairly busy day on Japan's economic calendar today with the BoJ minutes from the February meeting and January industrial production figures due out.

Risk currencies drop against the greenback

Risk currencies mostly lost ground against the greenback indicating a clear shift in sentiment as we head into a crucial weekend for the Ukraine. After having risen sharply yesterday and approaching the top end of its recent range on the back of positive jobs data, AUD/USD dropped sharply in US trade. Once again I'll be eyeing the 0.90 level for some support should this drop continue heading into Asian trade. While there is no local data due out today, focus will remain pinned on China and any developments following the disappointing data. The move in the euro was compounded by some fairly dovish comments by ECB president Mario Draghi. Draghi aired concerns about deflation again saying it is now more relevant while euro gains were flagged as increasingly relevant to price stability.

ASX to drop sharply

Ahead of the local market open we are calling the ASX 200 down 1.1% to 5,353. We have seen the market find support in the 5,350 region on a number of occasions in the past and we could see this support kick in again today with bargain hunters underpinning equities. Today will be the first time investors get a chance to react to that disappointing China data and therefore this is hardly surprising. Risk aversion heading into the Crimea referendum will result in some positioning today. However, there is a possibility we'll see some of the resource names come off their lows today particularly after the gains for iron ore, oil and gold. Iron ore jumped 3.8% to 111.50 and this represents a 6.5% rise from its lows earlier in the week. BHP's ADR is pointing down 1.9% to 35.70. Gold could be the commodity of choice heading into the weekend.

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,353.20

-59

-1.10%

Japan 225 (Nikkei)

14,417.50

-399

-2.69%

Hong Kong HS 50 cash (Hang Seng)

21,429.10

-327

-1.50%

China H-shares cash

9,177.80

-144

-1.55%

Singapore Blue Chip cash (MSCI Singapore)

343.91

-4

-1.17%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

16,117.50

9

0.05%

US 500 (cash) (S&P)

1,847.35

1

0.05%

UK FTSE (cash)

6,524.80

-29

-0.44%

German DAX (cash)

8,952.50

-284

-3.07%

Futures Markets

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

Dow Jones Futures (March)

16,112.00

-272.50

-1.66%

S&P Futures (March)

1,846.25

-27.13

-1.45%

ASX SPI Futures (March)

5,354.50

-58.00

-1.07%

NKY 225 Futures  (March)

14,435.00

-437.50

-2.94%

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

$0.9029

-0.0034

-0.38%

USD/JPY

¥101.675

-1.070

-1.04%

Rio Tinto Plc (London)

£32.28

0.54

1.70%

BHP Billiton Plc (London)

£18.34

0.41

2.29%

BHP Billiton Ltd. ADR (US) (AUD)

$35.70

-0.70

-1.93%

Gold (spot)

$1,372.68

-0.90

-0.07%

Aluminium (London)

1735.25

-28.25

-1.60%

Copper (London)

6400.00

-99.00

-1.52%

Nickel (London)

15763.0

89.00

0.57%

Zinc (London)

1986.75

-14.25

-0.71%

Iron Ore (62%Fe)

111.50

4.10

3.82%

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(Photo: Reuters / )
A woman looks at an electronic stock quotation board in Tokyo.
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