Tradenext Morning Comment

17 March 2014

Asian shares equities had a mixed performance overnight, after some real weakness at the open, then were lifted by movement into a Yen carry before finally looking weaker sparked by the news out of China. The Nikkei ended the session down 0.35%, ASX 200 down 0.22% and the KOSPI up 0.40%, What lies ahead?

With a voter turnout of 79% (US Presidential elections have not exceeded that since 1900) Crimea is set to join Russia. "The Supreme Soviet of Crimea will make an official application for the republic to join the Russian Federation at a meeting on March 17," Sergiy Aksyonov said in a tweet. The US, UK, EU and the French have all come out and rejected the vote and now there seems to be strong suggestions on sanctions on the wires.

Also overnight the PBOC announced they would double the size of the daily trading bands for the USDCNY to +/-2.0% though this is not a big shock, it signals the one-way bet on CNY is over and we should expect more volatility going forward. The PBOC hopes that this move will solve the problems caused by hot money flowing into a carry trade raising rates and the CNY value that is was facing in 2013.

FTSE set to open slightly higher I still feel the UK is unlikely to go ahead with sanctions and on top of this the FTSE/UK exposure to this Russia/Crimea risk is lower than the rest of Europe. Today it's a choice between trading Gold or stocks as one goes up the falls no need to double your exposure. With everyone now calling the EUR higher against the USD pull backs will be interesting will they be met with real money buyers of the panic of weak longs exiting their positions perhaps both?

This week we have the UK budget announcement, UK jobs report, BoE minutes, German ZEW, SNB rate decision, RBA minutes and the FED with a rate decision and discussion on their pace of QE. With all this and then back and forth over Crimea not to mention what the final verdict is on this missing plane I expect some volatility this week in the markets.

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