Tensions ease, Stocks surge, FX markets buck but only the Yen really moves

March 5, 2014

What a strange world we live in. The reaction to Russia entering Crimea struck me as too sanguine in markets the other night and so it is today that we see the S&P 500 at a new all-time closing high and markets shrugging things off as though the worst is over.

Of course I hope that is the case but as a student of world, economic and market history the creep into the Crimea by Putin could be the thin end of the wedge. of course the worst might be over but just because nuclear weapons exist to to have scared the worlds leaders into submission since world war two does not mean that humans are not still humans and Emperors or want to be emperors aren’t still walking the earth and being born everyday.

So I remain cautious.

But I am also realistic and play the market in front of me and on that front you just can’t kill this bull market in US stocks with a stick. It seems that each reversal only last one or a few days at most before traders shrug their shoulders and hit the buy button once again. The change in sentiment yesterday occurred late in Australian trade  when Russian War games ended and the troops were send back to base.

FX markets reacted aggressively and Stock futures trading in Asia leapt higher as fear receded of all out war.

So the scene was set for a rally in European and US equities which has taken the S&P 500, remarkably it seems, to a new all time intra-day and at the close it sits at 1,874 up 28 points for a gain of 1.53%. The Dow is similarly ebullient up 1.41% and the Nasdaq is sweeping all before it up 1.75%.

In Europe the FTSE rose 1.72% but it was the continental bourses which surged the most. The DAX rose 2.46%, the CAC rose 2.45% while stocks in Madrid rose 2.51% and in Milan 3.62%.

On the ASX Futures market overnight the SPI 200 March contract surged 45 points to 5449.

On global FX markets the Yen is the big loser as traders are more risk taking in the past 15 hours with USDJPY rising to 102.25 for a gain by the US over the Yen of 0.79%. EURJPY is also sharply higher catching your correspondent short but the Euro and GBP for all the light and smoke in the past 24 hours are largely unchanged at 1.3734 and 1.6673 respectively.

Indeed GBP found support at fast moving average again. I’ve been short sterling for some time now looking for a break back into the 1.64-1.65 region and I thought we might have gotten it yesterday but once again, as is usual, it found support at the fast moving average I use which you can see in the chart below.

A break of 1.6630 is need to open the way to the slow moving average at 1.6580 which if it breaks will likely precipitate a cascade. resistance is 1.6750.

The Aussie likewise is barely moved after an initial fall after the RBA noted the Aussie was still high by historical standards yesterday afternoon it did has has become custom recently and just found buyers lurking.

– On commodity markets gold reversed sharply as tension about tensions eased (although there is little evidence Putin is really backing off) and sits at $1334 this morning after a high around $1350 yesterday. Nymex crude backed off as well losing 1.64% to $103.20 Bbl, Copper bounced 4 cents to $3.26 Lb but the situtation in the Ags pits remains tense with corn up 2.75%, wheat up 2.07% and soybeans rose 0.76%.

On the data front today the ABS will release the Q4 GDP at 11.30 AEDT but before that we’ll get the AiG performance of services index which then leads into the global run of Markit and HSBC services indices for the globe. European retail sales will be important as will the ADP employment change in the run up to non-farms on Friday night.

Have a great day and good hunting

Greg

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