Chinese data and Ukraine referendum weigh on markets | Vantage FX Market Wrap

We have a weird market at the mercy of short term players and views so overnight it was an ugly night on markets as tensions over the Ukraine rose in the lead up to this weekend’s referendum and a Russian buildup on the Ukrainian border.

At the close, and after a relentless day of falling stocks the Dow is down 231 point for a fall of 1.41%, the Nasdaq is down 1.46% and the S&P has lost a hge 22 points to 1,846 and a loss of 1.19%.

We missed it in Asia yesterday but the key seems to be more disappointment about the Chinese data yesterday in Europe and the US even though Asia seemed much less perturbed. Industrial production in China dropped to 8.6% year on year from 9.5% expected and 9.7% last. Retail sales also under shot expectations printing 11.8% against 13.5% expected.

Looking at Europe and stocks were lower across the board but the big news was Mario Draghi finally getting religion on the threat of deflation and mirroring Charles Beans comments on the Pound saying that Euro is too high and is now a factor in low inflation and the threat of deflation. At the close the FTSE lost 1.01%, the DAX 1.86%, CAC 1.28% while in madrid and Milan stocks fell 1.2% and 0.9% respectively.

Locally the ASX SPI 200 futures contract has dropped 58 points in overnight trade to 5354.

On currency markets the ramp that drove the Aussie higher just before the super strong employment data yesterday hit a wall at 0.9103 as geopolitical concerns and Draghi’s comments helped the Us dollar. The Aussie sits at 0.9022 this morning still up strongly on yesterdays 0.9080ish open. Showing how the concerns impact on macro markets the Yen strnegthened more than 1% with USDJPY falling to 101.62, Euro pulled back to 1.3864 and GBP is off almost 100 pips from the high at 1.6621 this morning.

Euro top is in – I’ll be sell sell selling after Draghi’s comments

I have been so disappointed with Mario Draghi’s intransigence and inability to be honest about the economic and inflationary future that Europe faces. His stoney faced ignorance about the risks facing the worlds biggest economy is just mind numbingly ignorant and stupid if he had any idea about the history of inflation for the last 1000 years.

Deflation can be devastating for an economy as we have seen with Japan over the past 20 years or so – it just sucks the life out of things. So Draghi getting religion overnight in his comments is a damn good thing.

Of course as is the case in the 21st Century currency manipulation seems to be the first port of call and his comment that the Euro is “becoming increasingly relevant in [the ECB’s] assessment of price stability” was a clear sign that he want’s it lower.

1.3802 is my fast moving average and 1.3740 is trendline support – but a break of one or both turns the picture significantly.

They have to break first though.

On commodities Nymex crude was up a smidge to $98.21 Bbl, Copper for march tanked again losing 4 cents to settle below $3 lb at $2.98 for the first time in ages while on the Ags corn lost 0.21%, wheat dropped 1.31% while soybeans rallied 0.65%. Gold rallied a little and is at $1371 this morning.

On the data front after Draghi’s comment yesterday the German CPI tonight is going to be huge for European bourses and the Euro. UK trade balance is also important and US PPI is out. There is nothing material in Asia other than Singapore retail sales.

Have a great day and good hunting


NB: Please note all references to rates above are approximate

To learn more about Greg McKenna, read on here.