Global Markets Overview – 3/10/14

We start the week on a downbeat note with a raft of disappointing headlines from the weekend putting Asia on the back foot. While non-farm payrolls surprised significantly to the upside on Friday, disappointing China data, escalating Russia/Ukraine concerns and the missing Malaysian aircraft have all contributed to a sombre mood.

February payrolls came in at 175,000 (versus 150,000 expected) and this saw the US dollar come to life. While the number of jobs added jumped, the unemployment rate ticked a bit higher. Presumably as the weather improves, jobs added rise along with the participation rate.

USD/JPY was perhaps the biggest beneficiary of the move as it rallied to 103.76, while some of the risk currencies like the AUD lost ground to the greenback. Risk will be in focus today after some key releases out of China disappointed.

China posted a 23 billion deficit on Saturday, a sharp drop from the 31.9 billion surplus recorded in January and also well below consensus. There was a sharp 18.1% decline in exports and some analysts feel this is a Chinese-New-Year-related distortion.

However, the 10.1% year-on-year import growth could signal increased activity is on the way. Import growth was quite significant in copper, natural rubber, fertilizer and airplanes. China's CPI was also slightly below consensus at 2% with lower food price inflation being the main reason behind the fall. This is not necessarily a problem as it allows the PBoC to remain fairly accommodative.

Meanwhile, Russia isn't backing down on the Ukraine push and now has a significant military presence and has made threats to cut Ukraine's gas supply due to unpaid bills.

Japan to open firmer

Major risk FX pairs have gapped lower this morning as focus shifts to all the negative press from the weekend. AUD /USD dropped to around 0.9045 after having closed at 0.9065 on Saturday.

Meanwhile USD/JPY is now back testing 103 again heading into Asian trade. Japan's Nikkei is pointing to a mildly firmer start with a few key releases due out. At 10.50 AEDT we get Japan's revised Q4 GDP where we might see growth revised lower along with current account and bank lending data. Apart from that there aren't any other major releases from the region.

Resources to weigh on local market

Ahead of the open we are calling the ASX 200 down 0.2% at 5,450. Today is also the anniversary from the 2009 lows for the ASX 200 when it bottomed out at 3,121. Since then the local market is up a whopping 75%. While there are plenty of positives for equities at the moment, particularly the fact that we saw a very strong close on Friday, it'll be difficult to see investors drive risk higher given everything that's taking place at the moment.

Additionally, a couple of States, including Victoria, have a public holiday today and this might impact volume. As a result, I wouldn't be surprised to see a risk-off tone for the local market. Iron ore dropped a whopping 2.3% to 114.20 and this will remain a significant concern for local iron ore names. This, along with disappointing China data is likely to weigh on the resources today. There was also a sharp drop in gold on the back of the better-than-expected NFP data. For the rest of the market I expect to see some choppy trading as investors await clarity.

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