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Capital flows back into defensive havens as stocks and SEK retreat
00:00, 05 May 2014
This new week has begun with traders taking a much more cautious approach following weekend economic and political developments. There appear to be three major factors driving trading action so far today. First, markets have started to pay attention to the deteriorating situation in Ukraine once again. Wheat and corn are rallying on concerns unrest could lead to supply disruptions for a major exporter. Currency havens like gold, silver, JPY and CHF are all on the rise today, indicating a decisive defensive retrenchment is underway. Interestingly, crude oil has not taken part in this action indicating that traders believe there is a higher risk of disruption to grain production than energy production or transit. Indices in Europe are all trading lower led downward by the Dax suggesting growing fears that even if violence doesn’t spread, sanctions could have a negative impact on the European economy. Second, Chinese data was mixed over the weekend but traders focused more on the disappointing HSBC manufacturing number sending Chinese indices down to start the week. Australian action has been mixed ahead of tonight’s RBA meeting increased job ads offsetting disappointing service PMI. Third, it looks like we are getting more follow through from Friday’s US non-farm payrolls which came in way above expectations solidifying the case for continued tapering and potentially moving forward the timetable for interest rate increases. The other significant development so far today has been a selloff on SEK and NOK which have dropped down to the bottom of the league standings after Sweden released very disappointing industrial production and orders numbers which may keep the pressure on the Riksbank to cut interest rates even further to prop up the flagging economy. Corporate News Pfizer $0.57 vs street $0.55 Occidental Petroleum $1.75 vs street $1.70 Economic News Economic reports released overnight and this morning include: China HSBC manuf PMI 48.1 vs street 48.4 China non-manufacturing PMI 54.8 vs previous 54.5 Australia service PMI 48,6 vs previous 48.9 Australia inflation 2.8% vs previous 2.7% Australia building approvals 20.0% vs previous 23.2% Australia job ads 2.2% vs previous 1.4% Sweden industrial production (4.5%) vs street 1.5% Sweden service production 2.6% vs street 2.0% Sweden industrial orders (11.2%) vs street (5.6%) Eurozone investor confidence 12.8 vs street 14.3 Eurozone producer prices (1.6%) vs street (1.7%) South Africa manuf PMI 47.4 vs street 50.2 South Africa unemployment 25.2% vs street 24.7% Economic reports due later today include: 9:45 am EDT US Markit service PMI street 54.5 10:00 am EDT US ISM non-manuf PMI street 54.0 9:30 am EDT Singapore electronics index street 51.9 9:30 am EDT Singapore PMI street 51.1 10:00 am EDT Canada confidence previous 60.1