Global Markets Overview – 2/28/14

Equities edged higher with the S&P managing to close at a fresh record high as a better-than-expected core durable goods reading and comments by Fed chair Janet Yellen lifted sentiment. However, unemployment claims came in worse than expected and Yellen suggested the recent weakness in data could be largely weather related, but further assessment over the next few weeks will be needed to provide clarity on the matter. Until then, tapering is likely to remain on course at $10 billion a month. The longer this poor run in data rolls on, the more the cracks will show on the US data front. At the same time, the Ukraine situation seems to be escalating in the background and could haunt markets in coming weeks.

AUD/USD will be in focus yet again with private sector credit data due out. After a sharp sell-off on the back of yesterday's private capital expenditure numbers, AUD/USD has bounced back strongly and is now at 0.897. The range just continues to hold despite disappointing economic releases. However, there has been mounting pressure to the downside and traders might be potentially looking to sell the pair on strength. Private sector credit for January is expected up 0.5% on-month and higher by 4.1% on-year. Another weak read could finally see AUD/USD head back to the bottom end (0.89) of its current range. There might also be some positioning ahead of tomorrow's China PMI reading which is expected to come in at 50.2. After the recent disappointment in the HSBC print, a drop into contractionary territory could be devastating for risk, come Monday.

Plenty of data from Japan

Japan will be one to watch in Asia today with a raft of economic releases set to hit the wires. USD/JPY dipped below 102, but has since recovered a bit of ground. The Nikkei is pointing mildly higher at the moment, but considering several releases are due before the market open then this could really go either way. The data kicks off with manufacturing PMI followed by household spending, CPI, unemployment rate, industrial production, retail sales and housing starts. Investors will be looking for signs that Abenomics is gaining momentum ahead of the sales tax hike kicking in in April. On the USD side we have quite a number of Fed members speaking later today including Stein, Kocherlakota, Plosser and Evans.

Qantas will remain in focus

Ahead of the open, we are calling the local market up 0.4% at 5430. Today is also the last trading day of the month and all up it has been a stellar performance for the local market after a disappointing January. We have managed to put on 4.3% as of yesterday's close and there is potential to extend these gains in today's session. Given the significant challenges the market was faced with through February, particularly on the earnings front, then this performance is fairly solid. Resource names might enjoy a recovery today after overnight gains for gold and iron ore.

On the earnings front we have James Hardie's 3Q earnings along with Virgin Australia and Woolworths 1H earnings. Meanwhile Qantas will remain in focus after a sharp drop yesterday with uncertainty prevailing over earnings. CEO Alan Joyce said they will continue to talk to the government over coming weeks as they try to find some middle ground. Analyst downgrades are also starting to roll in, with Credit Suisse cutting the stock to an underperform (from neutral) with a 97 cent price target.

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