Global Markets Overview – 4/14/14

Sentiment is little changed from Friday's US close, when most major markets continued to lose ground. Once again focus remains on the upcoming reporting season after JP Morgan's results disappointed. Investors will always be concerned that earnings will not match valuations, and at the moment tech stocks and major banks are enduring the brunt of the selling. Regardless of the equity sell-off, it hasn't been a dominant risk-off theme as most major FX pairs remain fairly mixed.

AUD/USD is sidelined just shy of 0.94 and USD/JPY is holding at 101.56. The big move so far has been in the euro, where EUR/USD has dropped to 1.385 on the back of some comments by ECB President Mario Draghi. Draghi highlighted that the strength in the currency will require an accommodative policy stance. Meanwhile, concerns about the Ukraine ramp up yet again with Russia talking up the threat of a civil war in the country.

Ukraine developments fan gold higher

While it is a short trading week with Easter holidays likely to keep volume subdued, it will still be a very important week on the macro and equities fronts. Around 10% of S&P companies report, while the euro will be in focus after Draghi's comments and the Ukraine developments. Investors are likely to turn to gold as a destination of choice given the uncertainty markets are facing. There has already been some excitement in gold this morning as the precious metal rallied to 1326 after gapping higher at the morning. Gold was trading at around 1318 on Saturday morning and is now front and centre among traders.

We could also see some moves in the US dollar with Janet Yellen on the wires along with the Beige Book this week, and this would potentially impact the precious metal as well. Ukraine developments are also likely to be yen positive, which would ultimately weigh on Japanese equities. As it stands we are calling the Nikkei around 1% lower.

Equities in for a weaker start

China growth will be back in focus with GDP data due out on Wednesday and this is likely to be a key event for the AUD and local equities. Growth is expected to slow to 7.3% and it'll be interesting to see how investors interpret the reading. Whether this will fuel hopes of stimulus from China in the second half of the year remains a major talking point. Locally we also have the RBA minutes where the recent strength in the AUD might draw some comments.

Ahead of the Australian market open we are calling the ASX 200 down 0.3% to 5413. The mildly risk-off tone due to Ukraine developments could result in further selling this morning. With gold rallying to a two-week high, precious metal names could be a bright spot today and are likely to outperform. Meanwhile, iron ore weakness will weigh on the iron majors with BHP's ADR pointing down 0.3%.

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