Welcome to Monday’s ‘Just A Minute!’ bringing you a 60 second summary of what’s happening in the markets:
Main Trading Event Of The Day: EUR German Flash Manufacturing PMI @ 08.30 GMT
Trading Event Of The Week: Key global leaders are meeting in the Hague this week for scheduled nuclear talks, however, the current Crimean crisis will provide the basis for major discussion and global focus. There is potential for Russia to be removed from the G8, furthering the geopolitical tensions and humiliating president Putin. If such a move is made, there will be significant reaction in the global financial markets.
WHAT WE’RE WATCHING TODAY
China & Japan Data In Focus This Week
In the markets this week, much of the focus will be on data from China and Japan for the latest insight on the health of Asia’s two biggest economies. China’s HSBC’s flash purchasing managers’ index (PMI) for March is released on Monday, followed by industrial profit data on Thursday. The HSBC PMI fell to 48.1 in March, compared with a final reading of 48.5 in February, staying below the 50-mark that divides contraction from expansion in the sector. It is the latest sign of weakness in the world’s second biggest economy. Favourability towards investing in Chinese stocks has diminished over the past four years among market analysts, leading almost every previous bull to lose interest. Analysts are now calling for deflation in the country where they once could only see unstoppable growth. Focus is now on a credit bubble and efforts by the PBOC to deleverage in order to reign in shadow-banking. The deflationary pressures China is experiencing are also linked to commodity prices. Despite the pessimism, some analysts believe that the four-year downtrend in the Shanghai Composite Index is coming to an end, rather than getting ready to accelerate, suggesting that fundamentals almost always look the worst before price turns.
In Japan, economic data at the end of the week will provide a snapshot of the economy and is likely to show continued reasonable growth albeit distorted by the pull forward associated with the coming sales-tax hike. Data is expected to show inflation in Japan rose an annual 1.3 percent in February, after a 1.3 percent rise in January. Retail sales are forecast to rise 3.2 percent in February from a year earlier, while February household spending is seen up 0.1 percent from a year earlier versus a 1.1 percent rise in January.
U.S. Dollar Needs Fresh Impetus To Continue Rally
The U.S. dollar held on to last week’s gains on Monday although there appears to be a lack of any impetus to extend them. The dollar index stood at 80.143, little changed from late New York levels on Friday, not far off a three-week peak of 80.354 set on Thursday. Investors snapped up the dollar last week as they swiftly brought forward the risk of a U.S. interest rate hike early in 2015 after Fed Chair Janet Yellen surprised markets by raising the prospect of such a move. Traders said further gains for the dollar now depend on the strength of coming data, with any acceleration in the U.S. economic recovery likely to bolster expectations of an earlier normalisation of Fed policy. A broader based rally in the USD requires validation of the Fed’s more aggressive interest rate forecasts from a continued step-up in U.S. data according to analysts.
Gold Extends Weekly Loss On Speculation Of Interest Rate Hike
Gold extended the biggest weekly retreat since November, falling half a percent on Monday on speculation that U.S. interest rates will increase next year, further denting the metal’s appeal as a hedge against inflation. A lack of activity in the physical sector also raised some concerns, with demand from China likely to be subdued because of a weak yuan and the discounted prices on the Shanghai Gold Exchange, which discourage imports. Gold eased $7.14 an ounce to $1,326.80 down from a six-month high of $1,391.76 hit early last week. Gold remains under pressure from the U.S. dollar as the U.S. Federal Reserve scales back its quantitative easing program and has suggested a rise in interest rates earlier than expected. The Federal Reserve announced its third $10 billion cut in monthly bond purchases last week as Chair Janet Yellen said benchmark interest rates may rise about six months after the asset buying ends, expected later this year. Investors are less concerned about the tapering part but more about rising U.S. interest rates with Yellen’s comments now at the back of investors’ minds until as 2015 approaches.
That sums up today’s highlights! As usual, you can keep up with events, news and trading tips on our Facebook, Twitter, Google+ and LinkedIn pages.
We hope you have a profitable day on the markets!