Global Markets Overview

Thin trade, earnings and conflict

Surprise earnings from Citigroup have certainly managed to snap the S&P out of its downward trend. The S&P registered its worst week since January last week, but snapped back on Citi earnings and better-than-expected retails sale.

The bank saw better-than-anticipated revenue streams from its fixed income, commodities and currencies divisions, as well as its equities division; these managed to offset the softer banking revenues as net interest margins contracted slightly and saw lending margins go with it. What was clear is that Citi's numbers were in stark contrast to JPMorgan's on Friday, which were well below expectations. The Citi numbers do give the market some slight optimism to the remaining US banks due to report, which could surprise to the upside.

Overnight trade was in the green, with Europe and the US completely overriding the future markets calls. However, trade was light and there was a heavy amount of selling into the close which erased as much as half of the gains in the case of the NASDAQ. Be aware that with Easter approaching, light trade is expected to continue, which will make for choppy trade.

US earnings season hits full pace from tonight, with more than 150 companies due to report by Thursday; any minor miss in earning expectations from the likes of Yahoo!, Intel, General Electric, Google, Coca Cola, AMEX, Bank of America, Morgan Stanley or Goldman Sachs could be another catalyst for a leg down on Wall street.

What is also interesting from overnight trade is that the Ukrainian situation was ignored in large. However, it is a conflict waiting to ignite; gold on the open of Asian trade yesterday jumped up $10 on the events from the weekend and has remained elevated for the remainder of global trade.

The biggest development is interim president Oleksandr Turchynov who has announced that the country will vote on a national referendum to turn the republic into a federation. This is a massive change in tact from the Ukrainian side as this is the vote that Russia has been pushing for and it has the prospect of dividing the country straight down the middle. The ethnic Ukrainian west and the ethnic Russia east continue to taunt each other with political vitriol which could see a clear divide.

The questions become does eastern Ukraine vote for annexation like Crimea and join the Russian Federation, or does it vote to join the new Ukrainian Federation and somehow get the Russian ethic population to accept this?

In short, further conflict in the country is a certainty; gold, the EUR, the DAX, the ruble and the Micex will move on flare-ups and are the markets to watch as this story hits the front pages once more.

Ahead of the Australian Open

The only major news to come out of Asia today will be the release of the RBA minutes. I am not expecting a lot from the minutes; the April statement was basically a carbon copy of the March statement with a very neutral stand.

The minutes are unlikely to create a stir, but the market will be searching for any inferred comments or meanings as to how the board is seeing the move in the AUD. It certainly isn't going to be pleased with a dollar above 94 cents, but its willingness to move on the currency looks very unlikely.

So, after making a near six-year intraday on April 10 of 5503.5, the market has given up 144.6 points in just three trading days - the ASX is due for a bounce; the question is, will it be a dead cat bounce or supported move? We are currently calling the ASX up 19 points on the 10am bell (AEST) to 5378 as Easter approaches.

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