Global Markets Overview – 2/24/14

G-20 for growth

The most interesting macro news from the weekend came from Sydney following the conclusion of the G-20 summit. The key take outs from the meeting are:

Growth: global growth remains below trend as seen in the projections for the US, Japan and Australia; this has been the first G-20 meeting since the GFC that has seen growth as the key theme rather than austerity and blame for the GFC over the past six years. All nations want to see global growth around 5% rather than the current 3% level.

Emerging markets: this was the first real admission from global central banks and policy makers that emerging markets cannot be ignored as spill-over effects from global stimulus measures impact the structural weakness of these economies.

However, both Mario Draghi and the Federal Reverse stressed that they were bound by their respective domestic mandates and that 'it's also up to emerging market to attend to their own structural weakness.'

This clearly shows that the effects on emerging market are known, and that the growth mandate that has arisen from the Sydney meeting is certainly a global goal; however the likelihood of any change in the Fed's current trajectory for unwinding its stimulus program is slim to none and this will continue to affect these nations.

What does this mean then for currencies and economies the world over? The clear idea is for growth to move at 2% above current estimates; job creation, consumer demand and economic expansion are sluggish in pockets of the world, and it is in the interest of all nations to see current central bank policies remain accommodative and to have a coordinated approach to communication and action.

Form a currency perspective it is highly likely that we will see further stresses in emerging nations that have yet to get their houses in order. Turkey, India and Argentina all attended the meeting and it will be interesting to see how they approach the preceding months. Turkey has deliberately 'stock' raised rates to try and stabilise its currency and bond markets at the expense of domestic growth. India sold out its foreign reserve during its currency slide last year, leaving little room for error and Argentina is still suffering from endemic structural flaws.

Therefore one thing that is also highly likely from the G-20, is that pockets of volatility are coming as the spill-over from stimulus out of the US, Europe and Japan affect different nations at different times.

Ahead of the Australian open

There is not a huge amount of macro news affecting today's trading session in Asia; tonight sees the release of German IFO business climate and the Eurozone's consumer price index which is unlikely to affect Asia until tomorrow.

With the US market slightly off at the close on Friday, the futures markets are currently calling the market down seven points on the 10am bell (AEDT) to 5431. What is interesting about the current trade is 68% of ASX listed companies are trading above their 200-day moving average. Something that has been noted, to put this in perspective, is that when the ASX was at its peak in 2007, 62% were above this level.

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