This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
China data was releases post local trade and this set the tone for overnight trade. Industrial production slowed significantly at just +8.5%, which was well below consensus of +9.5%. Retail sales and fixed asset investment data also missed estimates and analysts feel the combined impact of these readings points to a high likelihood of a big GDP drop for Q1. Another school of thought suggests that the pollution fight has resulted in a lot of plant closures, which would ultimately weigh on data.
There was also some data out of the US with retail sales and unemployment claims both coming in ahead of expectations. This to an extent supported the US dollar against risk currencies. However, it was a different story against the yen as risk aversion ramped up and resulted in investors flocking to the safety of the yen. USD/JPY dropped from around 102.80 all the way down to 101.60. This sees the pair approaching March 3 lows which were printed when the situation initially kicked off. With Ukraine/Russia tension just not easing at all and heading into the referendum, fears the situation will escalate are keeping investors risk-averse. Yen strength will see Japan underperform the region at the open today. We are currently calling the Nikkei down a whopping 2.7% to 14,418.
Risk currencies drop against the greenback
Risk currencies mostly lost ground against the greenback indicating a clear shift in sentiment as we head into a crucial weekend for the Ukraine. The move in the euro was compounded by some fairly dovish comments by ECB president Mario Draghi. Draghi aired concerns about deflation again saying it is now more relevant, while euro gains were flagged as increasingly relevant to price stability.
ASX to drop sharply
Ahead of the local market open we are calling the ASX 200 down 1.1% to 5353. Today will be the first time investors get a chance to react to that disappointing China data and therefore this is hardly surprising. Risk aversion heading into the Crimea referendum will result in some positioning today. However, there is a possibility we’ll see some of the resource names come off their lows today, particularly after the gains for iron ore, oil and gold. Gold could be the commodity of choice heading into the weekend.