Global Markets Overview - 2/14/14

Equities in the US managed to extend their gains despite some disappointing economic data. Retail sales, unemployment claims and business inventories all missed consensus estimates, while Janet Yellen's Senate testimony was postponed due to weather-related issues. Despite all these negative prints, momentum still picked up with Comcast's TWC buyout helping sentiment along. Perhaps some are hoping the disappointing data could result in the Fed diverting/pausing its current tapering path, but given the recent comments from Yellen and other Fed members, this seems unlikely.

Following the disappointing data, the USD actually lost ground to most of the majors with the US dollar index slipping to 80.30. Even the AUD managed to regain some ground after having been drastically sold off in Asian trade yesterday on the back of a poor jobs number.

AUD recovers from yesterday's lows

AUD/USD printed a low of 0.8928, but has since bounced back to within reach of the 0.90 region. With the unemployment rate rising to the highest since July 2003, the RBA is stuck between a rock and a hard as CPI pressure limits its power to ease further. Even more concerning is that if the AUD falls due to the weakness in the jobs market, this will only fuel inflation pressure further. While the RBA recently switched to a neutral bias, many analysts still feel the bias is skewed more towards more easing and tightening.

On the local economic calendar we have RBA Assistant Governor Kent speaking this morning and this could have some impact on the AUD as it eyes reclaiming 0.90 against the greenback. Elsewhere in the region we have China's CPI and PPI for January due out at 12.30 AEDT. Inflation is expected up 2.4% year-on-year, which is slightly weaker than the previous 2.5% reading. Price pressure generally has a bearing on the amount of room the PBoC has to act and on risk sentiment overall. We also have China's new loans and the M2 money supply data due out.

ASX 200 in for a strong open

Ahead of the open we are calling the local market up 0.7% at 5343. The local market has gone from strength to strength this week and is now approaching a congestion zone in the 5350 region. Focus will remain on earnings, with RIO and NCM the main companies. RIO fell modestly in London trade despite producing a strong result. Perhaps the fact it guided the market to 2014 iron ore production of 295Mt seems disappointing given consensus was for 305Mt. Considering as iron ore is expected to contribute 94% of full-year earnings, you can see how a guidance like this affects sentiment. Otherwise the earnings were strong and the narrative from Steve Walsh was upbeat and shows that the company are seeing strong demand in China. The commodities space has remained interesting with natural gas extending gains due to bad weather, while gold has nudged through 1,300 aided by US dollar weakness. Related stocks should be supported today.

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