It seems that nothing can stand in the way of US markets capacity for making fresh record highs on a fairly regular basis.
A downward revision of US GDP didn’t do it, a less than stellar earnings season hasn’t dampened enthusiasm for equities, and neither did the news just prior to the finish on Friday of another escalation of events in the Crimea and Ukraine in general
; however those investors who bought late on Friday may well live to regret their hastiness this morning, with markets set to plunge this morning.
The escalation of tensions at the weekend in the Ukraine will manifest itself in a much lower open in Europe
as we start a new week and month, and with reports of troop mobilisations by Ukrainian forces, as well as reports that Polish forces are moving to reinforce its border with Ukraine, we can expect to see a fairly choppy session.
Given the relentless rise in US markets it would appear that US investors are quite content to put all their eggs into the basket
that says that the recent cold weather is the sole cause for the recent economic slowdown in the US economy, and once the weather warms up again, the economy will pick up again.
It seems that US policymakers are also content to peddle the weather line
, given various Fed officials comments last week, and there has certainly been some evidence that in pockets US data has beaten expectations, but the warning signs of caution are all there, for those looking for them, with US bond yields continuing to slide as bonds and equities rise in lock-step as investors buy US treasuries.
Away from the events in Ukraine we have the small matter of some European economic data to chew over this morning with Spanish, Italian, French and German final manufacturing PMI data
for February, though these numbers aren’t likely to be too different from their readings a few days ago.
While Spanish, Italian and German PMI’s
are expected to show continued expansion the French economy is expected to remain in contraction at 48.5
. The wider EU measure is expected to remain steady at 53, and as such likely to keep the ECB on hold this week, especially if the services numbers on Wednesday point in a similar direction.
In the UK
the latest manufacturing PMI for February
is expected to show a slight improvement from January’s 56.7 to come in at 56.8, with an outside chance that we might see some weather related weakness due to the recent flooding.
The latest lending figures for January
are expected to show a rise in mortgage approvals, net lending secured on dwellings and consumer credit. Mortgage approvals
are expected to come in at 74.5k, a six year high, while consumer credit and net lending are also expected to rise.
Over in the US
the latest ISM manufacturing numbers for February
are expected to show a slight improvement, coming in at 52.3, after the surprise drop plunge to 51.3 seen in January which was put down to the recent cold weather. A decent number today would certainly reinforce that perception.
– we’ve managed to hold below trend line resistance at 1.3835 from the 1.6040 highs this far, but the risk remains for a move towards 1.4000, on any break above it.
The euro bias still remains negative while we remain below 1.3835 but the lack of any dip does raise the concern we could push higher. Dips are likely to find support at 1.3720 and 1.3640, last weeks low.
– last weeks close saw cable post its highest monthly close since September 2008 and with the risk of a move towards 1.7000 and levels last seen in August 2009 when it traded at 1.7045. A close above 1.7000 could have huge significance in the coming weeks for the future direction of the pound. The next resistance remains at the highs last month at 1.6820, with strong support at 1.6600, and below that at 1.6510.
– pressure remains to the downside while below resistance near the 0.8270/80 area and as such the bias remains for a retest of the 0.8160/70 area. A drop below 0.8160 targets a move towards the 2010 lows and 0.8065.
– downside pressure continues to prevail with the pressure for a move towards the lows last month at 100.75. A break below the 100.20 level and 200 day MA could well see further losses towards 98.30. The US dollar needs to overcome the 102.80 level to retarget a move back through 103 towards 105.00
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