Russia and Ukraine continue to hurt the world economy

Share Markets: 

SENTIMENT soured as the tensions in Russia and Ukraine continued to unnerve investors. Weak data from China yesterday also added to concerns.

In Europe, stocks exposed to Russia were under pressure reflecting the prospect of more sanctions. In the US, the Dow fell 0.2%, the S&P500 dropped 0.5%, while the Nasdaq lost 1.2%.

Bonds: 

US treasuries had a mixed session.

Tensions in Ukraine continued to be supportive of bonds, particularly at the longer-end, resulting in a slight fall in yields of 10 and 30-year notes.

However, the prospect of the Federal Reserve hiking interest rates sooner than expected continued to see yields at the shorter-end lift and resulted in a flattening of the yield curve.

In Australia, yields on 3 and 10-year notes (implied by futures) fell to 3.05% and 4.14% respectively, reflecting the geopolitical concerns. 

Foreign Exchange:

The US dollar was generally well-supported overnight on the geopolitical concerns, but then fell early this morning against a basket of currencies and the euro.

The Australian dollar initially dipped on the disappointing Chinese data yesterday, but then recovered back to above 91 US cents.

Commodities: 

Gold prices fell sharply, weighed down by the prospect that the Fed will end QE and begin raising interest rates next year.

Copper prices also weakened following soft Chinese data yesterday, but talk of Chinese stimulus measures may have stemmed losses. 

Australia: 

No domestic data to report from yesterday.

China: 

The HSBC manufacturing PMI was softer than expected, falling to a reading of 48.1 in March, from 48.5 in February, where a reading below 50 indicates contraction in manufacturing activity.

Consensus expectations were the index to remain below 50, but to rise, rather than decline.

Europe: 

The Euro zone PMI composite slipped from 53.3 to 53.2 in the advance March result. The breakdown by country revealed a 1.7 point gain in the French composite PMI, but was offset by a 1.4 point fall in the German composite PMI.

Japan: 

Supermarket sales gained 1.5% in the year to February, from a decline of 0.2% in the year to January.

United States: 

The Chicago Fed national activity index rose from -0.45 to +0.14 in February.

The rise reflects a decent bounce in activity after declines in December and January.

On this measure, the constraint that weather disruptions put on activity was significant at the turn of the year but already abating by last month.

The PMI manufacturing index published by Markit slipped from 57.1 to 55.5 in March. The index remains well above 50 signalling expansion.

This survey of purchasing managers at US factories has been more upbeat this year so far than the better known ISM survey of the same industry.


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