Week Beginning 7th Apr 2014 Market and Economic Update.
Markets are expected to remain flat today as the selloff in the US potentially could continue.
Asian markets continued into negative territory on Tuesday as they reacted to the US markets performance over the last few days. With no new changes to the Bank of Japans policy the Nikkei 225 continued to plummet and at time of writing was almost 1.5% down (14,606.88) all this despite the BoJ stating they are on the way to a steady 2% inflation. Concerns about exports had been eased last week as an increase of over 2% on the previous month was announced however analysts believe Japan has not quite turned the corner just yet. The Hong Kong markets have held well, bucking the trend investors have backed HK tech stocks after a report commented that they may be undervalued. More data out of China later this week could solidify that their economy is performing better than initially thought. Trade and CPI data are released at the end of the week and will be eagerly anticipated.
European markets opened flat today amidst economic indicators from several countries. The EU is still in somewhat of a cloud, a cloud which appears to refuse to clear despite good data coming out of the majority of its members. With the ECB still saying there could be quantitative easing in the near future there were concerns that the Eurozone's recovery was not as robust as first thought. Today the UK reported that Manufacturing Output grew by 1% in February, up 3.8% on the previous year. Frances Trade Balance has been reduced. Last year it stood at €27.1Bn, this has now been reduced to €25.1Bn. French indexes have not been a friendly place of late and this news bolsters the fact that they are indeed going in the right direction. With the crisis in Crimea re-ignited over the weekend it is important for Europe to establish a line of talks with Russia in an attempt to limit the damage that could be done should Moscow decide that their supporter in the Ukraine need further assistance. With troops again reportedly nearing the border, tensions are rife and there is every possibility that Moscow could invade in the name of protecting the ethnic Russians currently occupying government buildings in Donetsk, Luhansk and Kharkiv. Any hostile move by Russia would be greatly berated by the Western community but as the current sanctions go, they have had very little effect. Any further sanctions would need to be substantially harsher and this is where Europe faces one of its biggest dilemmas, how to curtail a former super power who looks intent of re-building the old empire, right on its doorstep.
The major tech sell off started last week continued on Monday taking local markets in the US lower again. With all the major local markets down over 1% this mini trend is set to continue. Many analysts have said that the tech sector is vastly overpriced and that values have been overestimated. This comes just as earnings season starts later this week and many believe the markets will not recover for some time. The NASDAQ saw its largest 3 day decline since November 2011 and the S&P 500 hadn't fallen as badly since January. With only a few Fed announcements expected later this week there is little to spur a correction on the horizon, the Fed Balance Sheet and Treasury update on Thursday should shed some light however it is anticipated that the money that has left the markets in the last few days will return now that there is value back in the markets.
Major Indexes as of 7th April:
Index % Change Close/
DOW Jones (-1.02%) 16,245.87
FTSE 100 (-1.09%)
CAC 40 (-1.08%)
Nikkei 225 (-1.10%)
Hang Seng (+0.97%)
All eyes will be on how the US markets react to one of the harshest selloffs in a long time. So far Asia and Europe have not added any support to a turnaround today.
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