07.03.14 Friday Morning

As global markets come to a close, we look back on the extremely volatile week of trading that has been dominated by the escalating geopolitical situation in Ukraine. The trading week kicked off on very negative grounds as tensions grew to boiling point over the weekend between Russia and Ukraine prompting a very sharp sell off on Monday morning that last throughout the day. Global bourses didn’t take well to the situation with the FTSE 100 dropping over 100 points, the German DAX losing over 300 points and the Dow Jones falling nearly 200 points. The dramatic sell off began late Friday evening as headlines broke on Russian troops entering Crimea, however US markets closed before it took too much damage. As expected in times of crisis, investors directed their money directly into ‘safe havens’ with precious metal gold rallying over $20 and Brent Crude which surged nearly $2 higher to around $110.80 a barrel. Figures released in Asia sent the AUS/USD below 0.89; however investors bought into the dip to bring the pair back in line. This was the start of a very important week for the currency as a week full of Australian data has been released throughout the week.

Towards the end of Monday, Russia issued an apparent ultimatum to Ukraine to stand down by 3am, otherwise face force; however as Tuesday’s trading session opening nothing had happened. Investors took this window of opportunity to claw back the steep losses that occurred on Monday with global bourses rallying throughout the day which gained back more points than Monday’s sell off. The rally saw gold come slightly back in line, dropping around $13 dollars of its price as liquidity came out of the safe havens investors sought at the beginning of the week. US Indices took the bull by its horns on Tuesday afternoon and the S&P 500 set new record highs, an incredible rally after the steep fall a day earlier.

Australian building approvals were released early Tuesday morning, coming in considerably ahead of consensus at 6.8%, cash rate came in at 2.50% and the RBA statement which said the reserve bank is reluctant to change the cash rate over the following months. Further Australian economic data was released on Wednesday with GDP coming in better than expected at 0.8%. The key Australian data released on Thursday seemed to be the catalyst needed with the AUD/USD breaking the key 0.90 level after retail sales came in at 1.2% and trade balance came in at $1.43bn, both figures being better than expected.

The geopolitical situation between Russia and Ukraine began to ease by midweek, confirmed by Russian President Vladimir Putin in which he said he sees no immediate need to invade Ukraine. As tensions eased on Wednesday, the market began to move on the back of other things such as economic data with USD ISM Non-manufacturing PMI coming in at 51.6 and ADP non-farm employment change coming in at 139k, both figures being worse than expected. Profit taking looked like it has kicked in by afternoon trading on Wednesday after the significant bounce as investors locked in their earnings whilst the markets had calmed down.

Heading into Friday, global markets opened relatively flat amid a day of important economic releases with the most notable piece being the US non-farm unemployment change. The figure came in better than expected with the US economy adding 175,000 jobs in February. The January figure was also revised upwards to 125,000, indicating the US economy is starting to bounce back from a weather-induced setback. However, the jobless rate unexpectedly climbed from a five year low to 6.7%.

Looking into next week, headlines breaking from Ukraine may be the key reason for market movements as the economic calendar and company earnings looks particularly thin.

Stock of the week – Aviva

Despite reporting a £120m hit from recent storms and flooding, the British multinational insurance company confirmed that its turnaround is still on track with a 6% rise in annual profits. Shares jumped over 7% on Thursday after the results and as chief executive Mark Wilson said Aviva was now “simpler, more focused and better managed”.

Economic Data:

Monday: Nothing of high importance

Tuesday:

• JPY Monetary Policy Statement

• JPY BOJ Press Conference

• GBP Inflation Report Hearings

Wednesday:
 

• G7 Meetings

• NZD Official Cash Rate

• NZD RBNZ Press Conference

• NZD RBNZ Rate Statement

Thursday:

• AUD Employment Change

• AUD Unemployment Rate

• USD Core Retail Sales

• USD Unemployment Claims

Friday:

• USD PPI

• USD Prelim UoM Consumer Sentiment

Company Earnings:

Tuesday:

• Craneware PLC – Interim 2013 Earnings

• Hansteen Holdings PLC – Prelim 2013 Earnings

• Close Brothers Group PLC – Interim 2014 Earnings

Wednesday:

• StartPro Group PLC – Prelim 2013 Earnings

• Prudential PLC – Prelim 2013 Earnings

• Cares Power Holdings PLC – Interim 2014 Earnings

• Ocado Group PLC – Q1 Interim Management Statement