Week Ending 11th Apr 2014 Market and Economic Update.
Wednesday's apparent correction didn't last very long and as we enter Friday indexes in Asia have once again returned to the red.
Japanese indexes hit almost six month lows today as they held the momentum of the US markets poor performance yesterday. Not limited to just Japan the entire region saw declines which reversed yesterdays moderate gains. Both the Hang Seng and the Shanghai SSE have ended the week down albeit not to the levels seen in Japan. Every sensitive to US tech stocks the Nikkei ended the week almost 2.38% down. Chinese trade data showed a trade surplus for March despite a fall in both imports and exports. From a deficit in February of $23bn the managed a surplus of $7.7bn in March. China hasn't seen a back to back reduction in exports since late 2009 however it is fair to say that the Chinese New Year celebrations probably had a large effect on productivity during the first few months of 2014 and we should start seeing better data from the Chinese as we progress through the year.
Whilst Europe continues to recover, there is hope that the ECB's possible QE will not necessarily be needed. Over the last few weeks economic indicators out of the EU have all been relatively positive and have indeed suggested that many EU member have weathered the storm and are on the road normality. After announcing a reduction in the trade deficit and the IMF increasing the UK's growth outlook the BoE yesterday made no changes to policy. The deficit for March was £9.1bn down from February's £9.4bn. Attributed to low import and export figures the deficit was expected to be higher. In response the Bank of England has held interest rates to 0.5% and the feeling is that they will not look to raise this before 2015. The news helped keep the FTSE from seeing negative territory however Europe as a whole is expected to open down today. Good news out of Greece. For the first time since 2010 they were able to re-enter the capital markets. Greek bonds for long-term debt ended up being oversubscribed enabling them to bring the yield down from 5% - 5.25% to 4.95%. The €3bn bond sale attracted over 500 investors. Despite this, there were still demonstrations in the Greek capital, protestors are still unhappy with the austerity measures being forced by Brussels and the Greek Central Bank even had a bomb explosion outside its building on the day they ran the bond sale.
The NASDAQ had its worst day since late 2011 as the local markets saw a huge sell off just before earnings season. Closing over 3% down on the day worst hit were bio technology stocks whose index was down 5.6% on the day. After an initial reprieve mid week the US indexes all took a battering as profit takers hit the markets before earning season hits full swing. Largely touted as over-valued the tech sector was hit hardest with almost all gains recovered on Wednesday lost by close of trading. The S&P and Dow Jones were both dragged down by the NASDAQ and ended the day substantially lower. There are a host of economic indicators out of the US later today however whether this will be received positively and in enough time to stop the drop, time can only tell. We are being told that the US is in a steady recovery yet the FED is loathe to make any moves to curb its QE, this in itself causes concern for many investors and their sentiment can be seen in the dramatic way the markets have swayed this week.
Major Indexes as of 11th April:
Index % Change Close/
DOW Jones (-1.62%) 16,170.22
FTSE 100 (+0.10%)
CAC 40 (-0.66%)
Nikkei 225 (-2.38%)
Hang Seng (-0.97%)
Ukraine - Coming to a Resolution - Special Update
The continued crisis in the Ukraine has yet again heated up. Gazprom, one of the largest oil producers in Russia is looking to recoup the $2bn that is owed to them by the Ukraine government. In a statement from Vladimir Putin he confirmed that Moscow is not advising Gazprom in their actions however he strongly recommended that Europe look to help Ukraine settle their bill before the company decides to close off its pipelines. The IMF has been looking to get funds to the Ukraine to settle this so that it does not become a bargaining chip for Russia however considering that most of the natural gas the goes to Europe runs through pipes across the Ukraine it is a precarious situation. This along with Igor Shuvalov, the First Deputy PM saying that Russian companies that are listed on overseas exchanges should look to de-list will be seen as rather aggressive moves consider the PM has stated that Moscow is looking to resolve this crisis as quickly as possible. With reported troops on the border and PM Putin holding fast, threats of sanctions are still looming and analysts have said that unless the US were to enforce Iranian like sanctions very little could be done to punish Russia for the way they have dealt with the annexation of the Crimea. We will have to wait until next Thursday to see what the next step will be. Sol long as there are no further incursions in Ukraine the meeting in Geneva between Russia, the US, Ukraine and the EU will hopefully set the ball in motion and restore some faith in the region.
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