Global Markets Overview – 3/28/14

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By Evan Lucas, IG Markets Strategist | March 28, 2014 10:48 AM EST

End of the quarter overriding the growth story

With two trading days left in Q1, window dressing is becoming an art form, with most markets experiencing some form of it.

The S&P is case-in-point; jobless claims fell to the lowest levels since November, with 311,000 claims, and it beat expectations by 12,000. This is a good sign heading into employment week, with non-farm payrolls due next Friday along with the unemployment rate.

GDP grew at an annualised rate to 2.6% as consumer spending, which makes up 70% of the US economy, and added 3.3% to fourth quarter numbers - this is the best Q4 quarter print since 2010. Growth has been the buzz word all month as the big three, China, the eurozone and the US are questioned as to the quantity and quality that is being achieved. The US is certainly seeing growth, but the fourth-quarter read was below consensus and is still below the historical trend of the US.  

However, neither the jobless claims nor the GDP print moved the futures or the equity markets on the release; they are more interested with quarterly closes. The S&P started the year at 1841 and is currently eight points ahead year-to-date;  I would not be surprised to see the index close on a zero sum for the quarter, as hedge fund managers write off Q1. Over the period the S&P has tested the breakeven level five times either as a support or resistance. Do not be surprised to see the S&P registering 1841 points on the close of Monday's trade.

The ASX is another case-in-point; the market is currently sitting at 5350 - Q4 closed at 5352. Yesterday's trade was dominated by poor headline and poor global leads. The ASX gave up almost 1% in early and midday trade before moving up rhythmically into the close to see the ASX quarter looking decidedly neat and also a possible zero sum.

Abenomics

The biggest Asian market effort today is the data out of Japan. Core CPI is a massive part of Abenomics, and although the BoJ and the central government have removed the two-year timeframe to reach the 2% inflation target as on current metrics the rate isn't moving faster enough; there has certainly been a positive effect on inflation.

Last month the total read (year-on-year) was 1.4%, however the banks and the central government are watching the CPI print excluding food, as it is a better read on the overall economy. CPI ex-food on the consensus read is to see no change at 1.3% and looks to be stagnating.

With the BoJ looking increasingly unlikely to add to the already massive stimulus package signs, CPI isn't moving which will mean further measures will have to fall back on the Abe government and its three arrows. How it pulls its arrow levers is unclear; however it might just have to pull harder to get the Japanese economy out of this two decade deflation. 

Ahead of the Australian open   

We are currently calling the market down eight points on the 10am bell (AEDT) to 5342. However, I would expect the market to find support if it drops below 5340 today as quarterly window dressing will take over to leave little to chance for Monday's close.

Iron ore was once more able to tick up to 112.30, meaning it has now added 7.4% since it bottomed out on fears Chinese demand will plummet on oversupply. Rebar futures are also rising, suggesting the demand support is there and this might filter into the materials sector trade.

Once again the AUD is the talk of the currency world, moving to $0.9264, and from a technical stand point it looks unlikely to slow down, with Glenn Stevens no longer jawboning it lower. Goldman Sachs has changed its outlook on the currency, having closed all shorts to take a long call all the way to 0.936, suggesting the current rally is far from over, despite the fact next week could be a USD strength week. Tuesday's RBA statement will be key to this long call.  

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,342.10

-8

-0.15%

Japan 225 (Nikkei)

14,575.10

-47

-0.32%

Hong Kong HS 50 cash (Hang Seng)

21,886.80

73

0.33%

China H-shares cash

9,927.10

53

0.54%

Singapore Blue Chip cash (MSCI Singapore)

358.40

2

0.44%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

16,280.00

1

0.00%

US 500 (cash) (S&P)

1,850.43

-2

-0.11%

UK FTSE (cash)

6,591.60

20

0.31%

German DAX (cash)

9,451.00

41

0.44%

Futures Markets

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

Dow Jones Futures (June)

16,201.00

0.00

0.00%

S&P Futures (June)

1,843.13

-2.00

-0.11%

ASX SPI Futures (June)

5,341.00

-3.50

-0.07%

NKY 225 Futures  (June)

14,632.50

40.00

0.27%

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

$0.9248

0.0009

0.09%

USD/JPY

¥102.190

-0.005

0.00%

Rio Tinto Plc (London)

£32.75

-0.29

-0.88%

BHP Billiton Plc (London)

£18.49

0.18

0.98%

BHP Billiton Ltd. ADR (US) (AUD)

$36.03

0.05

0.14%

Gold (spot)

$1,290.95

-12.70

-0.97%

Aluminium (London)

1735.25

5.25

0.30%

Copper (London)

6565.75

49.50

0.76%

Nickel (London)

15710.0

-183.00

-1.15%

Zinc (London)

1973.75

3.75

0.19%

Iron Ore (62%Fe)

112.30

0.40

0.36%

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(Photo: / )
Passers-by walk past a stock quotation board outside a brokerage in Tokyo on 4 December, 2013 (Reuters).
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