Relief rally on Wall Street boosts Asian equities

Tuesday, March 18, 2014

After the weekend’s referendum in Crimea markets seem to be less uncertain as the relief rally on Wall Street yesterday saw both the DJIA and S&P 500 post steady gains of 1.13% and 0.96% respectively. Market participants managed to pull themselves away from the tense standoff between Russia and Ukraine as US economic data released yesterday encouraged buying on the recent dip. Industrial production rose 0.6% m/m in February from a contraction of 0.3% the prior month, indicating the slowdown seen at the start of the year was hampered considerably by the adverse weather conditions. Capacity utilisation also increased m/m, rising to 78.8% which helped support markets higher. Despite a tense standoff between Russia and Ukraine, much of the uncertainty surrounding Crimea has dissipated as a result of the vote, prompting investors to focus on housing starts, inflation and building permits data all due out later today.

Investors will also be paying close attention to this week’s FOMC meeting which will be Janet Yellen’s first monetary policy meeting as chair. Market participants expect the Fed to provide further details on its forward guidance on interest rates having already stated that rates will not increase until unemployment drops below the target rate of 6.5%. Economists polled by Bloomberg expect the Fed to taper asset purchases by another $10bn this month to $55bn while leaving interest rates unchanged at 0.25%.

Asian equity indices followed US markets higher during overnight trading as risk appetite slowly returned. After a sharp selloff that saw the Nikkei lose 5.72% last week and a shaky start to the week yesterday the index added 0.94% while the TOPIX closed 0.95% higher. Spot gold prices slipped further in early morning trading, testing support at $1,360/oz as investors took advantage of the recent buying opportunities in equity markets.

Renminbi traded towards 11-month low this morning after dropping 0.45% against the dollar yesterday as the PBOC reinforced its intention to allow market forces to play a greater role. The currency traded towards 6.1900 during the Asian session, compounded by the recent weaker than expected economic data which indicated the world’s second largest economy was slowing down considerably. For the coming sessions, increased short term capital outflows could see the currency depreciate further.

US industrial production increases 0.62% m/m

IP CHNG Index US Industrial Pro 2014 03 18 07 20 16 

Gold prices extend declines as risk appetite improves

XAU Curncy Gold Spot Oz 2014 03 18 07 39 49 

CNY weakens further against the dollar as PBOC loosens controls

CNY Curncy China Renminbi Spot 2014 03 18 07 47 29


Events for today

1000

DE

Mar

ZEW Economic Survey

1230

US

Feb

Housing starts

1230

US

Feb

Building Permits

1230

US

Feb

CPI

All times UK Local Time

Economic Market Calendar

Topics: US Fed, Equities, Gold, CNY
More from: Kash Kamal