Bond yields rose on both sides of the Atlantic yesterday on relief the Crimean referendum had not led to violence, while the resulting sanctions were perceived soft. Intra-Euro-zone spreads narrowed and equities rallied (S&P 500 up by 0.96%).
Asian equities are trading mostly with some gains this morning, though the moves have not been big. Yesterday’s moves thus look likely to have more to run this morning, both on bond and equity markets. However, uncertainty over the next Russian moves remains considerable and the mood could easily change later in the day.
Sanctions following the Crimean referendum soft – Putin’s speech ahead
Following the Crimean referendum, the EU targeted sanctions on 21 individuals, while the US blacklist included 11 Russian and Ukrainian officials. The sanctions were perceived as rather soft with limited impact. Russia recognized Crimea as an independent state, while Putin will address both houses of parliament on the matter today at 12:00 CET. There is certainly scope for the situation to heat up again and deliver another dent to sentiment.
US house builder confidence fails to rebound
The US NAHB housing market index rose only modestly from 46 to 47 following a drop from 56 in January. Weather continued to be a factor, but also a shortage of buildable lots and skilled workers, rising material prices and an extremely low inventory of new homes for sales were mentioned as sources of concerns. In addition, the index for sales expectations fell another point, further supporting the notion that bad weather is not the only issue holding back the housing market. A bigger rebound was seen in US industrial production in February.
Low inflation a continued worry for the ECB
The final February inflation number for the Euro zone saw a downward revision from the flash estimate of 0.8% y/y to 0.7%, i.e. equalling the low from last October. The revision does not really alter the ECB outlook, especially as core inflation was unrevised at 1.0% y/y, but underscores once again that risks are tilted towards more easing from the central bank.
US inflation and housing market data ahead
A fresh batch of US economic data will be in store today in the form of February CPI, housing starts and building permits at 14:30 CET. The headline y/y rate will probably fall back clearly from the 1.6% seen in January, while core inflation is not likely to point to anything but modest prices pressures for now. Housing starts and building permits, in turn, are expected to recover moderately after the slump seen in January, but risks are once again on the downside.
In the Euro zone, the German ZEW index will see daylight at 11:00 CET, the ECB will release the results of its latest main refinancing operation at 11:10 CET, while the ECB’s Supervisory Board Chairman Nouy will speak at a hearing before the Committee on Economic and Monetary Affairs of the European Parliament at 11:00 CET. The German Constitutional Court, in turn, is set to deliver its final ruling on the European Stability Mechanism at 10:00 CET.
Nordea