By Greg Peel

The peasants, it seems, are not revolting. As a result, the bells rang out on Wall Street.

There was much speculation, and much concern, that when the banks in Cyprus reopened on Thursday night, riots would occur. Some even considered ugly scenes inevitable, and feared the pictures on television would scare depositors across the Mediterranean into withdrawing life savings, just in case ? a potentially catastrophic scenario. But it was not to be. With deposits under E100,000 protected, and daily withdrawals strictly limited, the people of Cyprus did no more than form orderly queues to access funds, which had been cut off from them for ten days.

The lack of melee was all Wall Street needed. By the close on Friday, the Dow had pushed up another 52 points, or 0.4% further into blue sky, and the S&P 500 rose 0.4% to 1569 ? surpassing the pre-GFC peak of 2007 to mark a new all-time high.

Would it be the peak that finally brought in the sellers? After all, Thursday night was end of quarter and no doubt window dressing was afoot. Or would, as many believed, the breach into blue sky bring in the famed "cash on the sidelines" once for all, driving a new leg to a bull market?

It's somewhat old news by now, given the March quarter has seen a 10% gain for the S&P, but the US December quarter GDP was revised on Thursday night to 0.4% growth from the earlier revision of 0.1% growth.

Scenes of calm in Cyprus allowed the euro to rebound on Thursday, sending the US dollar index down 0.3%. The safe haven of gold was exited, with the metal falling US$10.20 to US$1596.60/oz.

The oils closed slightly higher on Thursday, but LME traders decided to square off base metals positions ahead of the four-day shut-down of the exchange. All metals closed around a percent lower.

The SPI Overnight rose 21 points, or 0.4%.

Major markets in Europe were closed on Monday as were the UK and Australian markets. For Wall Street, the attention turned to data.

China's manufacturing PMI for March rose to 50.9 from 50.1 which, while in the right direction, was a little disappointing given a better result was expected. The result nevertheless represents the highest level for the PMI since last April. The HSBC equivalent measure rose to 51.6 from 50.4.

Not so inspiring was the US manufacturing PMI, which fell to 51.3 in March from 54.2 when economists were predicting a 55.0 reading. At the end of the day it was this number that sparked weakness throughout the Monday session on Wall Street, albeit yet again stocks pared back losses towards the close.

The Dow closed down 5 points. The S&P's new high proved but fleeting, as the index fell from 1570 on the open by 0.5% to 1652. The 2007 high was 1565. The S&P was somewhat dragged down by the Nasdaq, which fell 0.9%.

It has been nearly two years since Wall Street has opened trading for a new quarter with a down-session. Commentators have also been pointing out this past week or two that the final push to new highs has been driven by defensive stocks, and not by cyclical stocks. Defensives were again the winners on Monday as material stocks and other cyclicals drove the downside. This would tend to suggest a set-up for that supposed pullback that never comes.

A weak PMI was enough to push the US dollar index down 0.3% to 82.74 and gold crept back US$2.70 to US$1599.30/oz. The Aussie is steady at US$1.0413.

The LME was closed on Monday night so there were no base metal markets. Brent crude rose US$1.05 to US$111.07/bbl, aided by a weaker dollar, while West Texas fell US33c to US$96.90/bbl, not liking the PMI.

According to reports, spot iron ore did not trade in China over the weekend, but was marked as US$137.34/t, up US24c from Thursday.

It's been a long time coming, but news reports on Thursday suggested that when Prime Minister Gillard travels to China this weekend, high on the list of priorities will be a push for an agreement to trade materials directly between Chinese renminbi and Aussie dollars. Such a move would be a boon for Australian exporters to China given the current need for both sides to convert into and out of US dollars to complete transactions. It would go some way to compensating for the strong AUDUSD in terms of costs and take the Fed and its printing presses out of the equation.

The SPI Overnight was closed on Monday. That leaves us with Thursday night's 21 point gain, although last night's Wall Street session and slightly disappointing Chinese data will likely temper that move from the open today.

The Australian market will need to come down from its chocolate high pretty quickly today, as straight up we have an RBA meeting. No one is expecting the central bank to move on rates, nonetheless. Australia's own manufacturing PMI is also due today, while RP Data-Rismark will release its March house price index.

Tomorrow sees Australia's February trade balance and HIA new home sales, while Wednesday brings the service sector PMI, building approvals and retail sales.

China will release its service sector PMIs on Wednesday before closing for public holidays on Thursday and Friday. The UK and eurozone manufacturing PMIs are due tonight, and service PMIs on Thursday.

In the US it's factory orders tonight and the services PMI and ADP private sector jobs number on Wednesday. Friday brings non-farm payrolls along with the February trade balance.

On Thursday the Banks of Japan and England and the ECB all hold policy meetings. It will be the first BoJ meeting under the new governor appointed by the Abe government and plenty of fresh QE is expected. Additional QE was also expected to be announced by the BoE last month, but was not forthcoming. UK data have not improved since and economists still feel it's only a matter of time. As to whether the Cyprus debacle and a lack of government in Italy is enough to force the ECB into the rate cut many have been expecting is up for debate.

Rudi will appear on Sky Business on Thursday at noon.


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