Markets Today: Ukrainian ceasefire accord lifts sentiment somewhat

The Ukraine and Russia agree overnight on a ceasefire accord to take effect from this Sunday in a marathon meeting in Minsk, Belarus between PM Poroshenko, Putin, Merkel and Hollande.

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The Ukraine and Russia agree overnight on a ceasefire accord to take effect from this Sunday in a marathon meeting in Minsk, Belarus between PM Poroshenko, Putin, Merkel and Hollande.

No one knows of course whether the ceasefire will be successful; for now, the Russian sanctions remain.  That agreement seems to have played some part in lifting investor sentiment on European bourses.

The Euro has also traded to higher levels, aided to some degree by the ceasefire news, but also by the decline in the USD that followed release of the weaker-than-expected US retail sales report.

Elsewhere in Europe, the Swedish Riksbank surprised markets, cutting rates to -0.1% from 0.00, with the SEK declining 1.7% net for the session.

Sterling however rose after the Bank of England raised its growth forecasts for 2016 and 2017, seeing inflation dropping below zero in coming months but then hitting its target by the end of its three year forecasting period.  And BoE Governor Mark Carney was unfazed by the currency, Carney responding to questions on the seven year high in the GBP in trade weighted terms by saying the BoE is “monitoring” it.

It was the January US retail sales report that shook markets up.  Once again, the report disappointed expectations, leading to a decline in the USD (the Bloomberg spot dollar index fell 1.00%), a rally in Treasuries, factors that supported the Dow, as did some positive corporate reports.

After being unceremoniously dumped yesterday after the spike higher in Australia’s unemployment rate, the AUD/USD has recovered its poise overnight, aided by USD selling to be trading close to 0.7750 this morning, after having traded as low as 0.7644 yesterday.  The market is now waiting to see what RBA Governor Stevens has to say in this morning’s testimony.

Coming up today/ tonight

RBA Governor Stevens and his team testify this morning before the House Economics Committee in Sydney commencing at 9.30 with an opening statement from the Governor and then opening the floor for Committee members to ask questions.  It will run through until a scheduled end at around 12.30pm.

There will be plenty of opportunity for the MPs to do some digging into RBA official thinking on the economy, the various moving parts now affecting the outlook and of course the Aussie dollar’s “over-valuation”.

It’s very quiet data-wise today with only NZ Food prices for Jan and NZ’s Non-Resident bond holdings this afternoon, also for Jan.

First up this evening are French, German and Italian preliminary GDP reports for Q4, France and Germany expected to grow by up to 0.3% but Italy to register a small contraction (-0.1%).  These come ahead and will refine the expectation for EC GDP that’s expected to have expanded by 0.2%.  There’s Greece’s GDP too, tipped to rise 0.4%/2.1%.

The UoM Consumer Sentiment prelim survey for Feb is released.  Not to say it could not go higher, but it’s now at a lofty level.  We’d note too that retail gasoline prices have been backing up somewhat so far this month while stocks have recovered from late Jan/early Feb’s sell down.  No change is the consensus expectation.  Dallas Fed President Fisher is speaking too.

Overnight

Market sentiment positive after Ukraine ceasefire: Eurostoxx 600 +0.7%, Dax +1.6%, CAC +1.0%, FTSE +0.1%.  Dow +104 points to 17,967, +0.6%, S&P 500 +0.6%, Nasdaq +0.9%, VIX 15.60 -8.0%.  Shanghai +0.5%, Mumbai +0.5%, Nikkei 225 +1.0% and ASX 200 +1.0%; ASX SPI futures this morning +0.5%.  US bond yields: 2s at 0.63% (-3), 10s at 1.98% (-3).  WTI oil at $51.36 (+5.2%), Brent at $57.06 (+4.4%), Malaysian Tapis (yesterday) $58.24 (-0.9%).  Gold at $1222.40/oz (+0.2%). Base metals: LME copper +2.5%, nickel -0.3%, aluminium +1.1%. Iron ore $62.3/t +0.1% Chinese steel rebar futures +0.2%. Soft commodities spot futures: wheat -0.8%, sugar +2.0%, cotton +1.0%, coffee 3.2%.  Euro Dec 14 CO2 emissions at €7.47/t (2.2%). The AUD/USD’s range overnight 0.7650-0.7779; indicative range today 0.7695-0.7770; the AUD/USD is 0.7751 now

German CPI (Jan, F) -1.1%/-0.4% (Prelim -1.0%/-0.3%); Sweden’s Riksbank cut rates to -0.10% from 0.00%, not expected; EC Industrial production (Dec) 0.0%/-0.2% (L: 0.2%/-0.4%; E: 0.2%/0.3%); Indian Industrial production (Dec) 1.7% (L: +3.8% y/y; E: 1.8%)

US Retail sales (Jan) -0.8% (L: -0.9%; E: -0.4%);  weekly Jobless claims (w/e 7 Feb) 304K (L: 278K; E: 287K)

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