The weekend gone by has been nothing short of a coordinated effort towards further confusion and uncertainty. I’m not certain that expectations were all that high but the G20 failed to reach any real conclusion in respect of spurring global growth while US data last week reignited speculation that yet another rate hike could be in the offing stateside. The market currently prices in a 10% probability for March but the chances for further monetary tightening increase substantially as we approach June (35.1%).
Ireland’s general election offered little but confusion with the possibility of a rainbow coalition or indeed another election later on this year. The Irish bond market reaction has been remarkably muted but this may reflect more on expectations for more stimuli from Mario Draghi on March 10th than any real confidence in the Irish politico. The 2 year bond yield trades negatively at -0.309%.
In a week heavy on the macro front, including but not limited to the US labour data, traders will have plenty to watch. European indices have started off lower, taking cues from the usual downside shenanigans in Asia. The Shanghai Composite dropped by 2.86% and this is ahead of the PMI releases tonight. Recent prints of this data point have, in recent times, only aided and abetted the equity bears so it would be foolhardy to expect something different this time.
Even with the small element of risk off in early trade, the euro is not bid. Again, this may point to (possibly overly -elevated) market expectations with regard to near term action by ECB.
Despite the fact that prices in copper and iron ore are softer this morning, ultimately consolidating gains from Friday, the miners are leading the charge in the FTSE100.
Gold is up 0.61% and this is helping to drag the likes of Randgold (L:RRS) (2.42%) and Fresnillo (L:FRES) (+1.06%). Glencore (L:GLEN) (+2.22%) is set to announce earnings tomorrow. The company will need to pick up the slack in its trading arm if it is to offset the rout in material prices
German retail sales grew 0.7%, but import prices dropped 1.5% reinforcing the outlook from February’s flash PMI results. The rate of increase in the expansion in economic activity in the Eurozone powerhouse has slowed.
The financial sector is the main drag on the UK benchmark this morning.
Standard Chartered (L:STAN) is off by 3.83% as fears increase that its credit rating could be slashed by S&P. Already on credit watch, there is increasing uncertainty surrounding banks especially those with Asian exposure and the ability to recover profitability is in doubt in the near term.
HSBC Holdings PLC (N:HSBC) (-2.86%) has been cut to underperform by Bernstein.
Skyline Corporation (N:SKY) (+1.45%) has been raised to buy at Goldman Sachs (N:GS).
Later sees data released on UK lending and money supply, EU and Italian CPI, Chicago PMI and US pending home sales
We call the Dow lower to 16529 – 100 points lower from Friday’s close.