Asian markets to open softer

As we head towards the last week of February, there are significant shifts in the macro economic landscape from the start of the year.

The Fed is on its course to reduce accommodative policy, China’s growth is contracting with manufacturing slowing for a second month and US economic data failed to support a recovering economy.

The optimism that China’s slowdown was a blip is now a near certainty for the first half of the year at least, while the global equity markets have been dismissing poor US data and blaming it on the weather. Last week’s disappointing home sales on the west coast, where sales were down 7%, finally put an end to the weather excuse; however equities continue to inch higher.

The overall optimistic tone of the US market can be attributed to Yellen’s reassurances during her testimony. Stability in the EM markets has earned her supporters from G-20 leaders. This is a turnaround as world leaders were critical of the Fed’s policy and calls for consideration of a reverberating effect on their economies.

The S&P 500 had a strong opening last Friday and it looked like it was about to break the high of 1850 but it retreated and closed significantly lower at 1836. The positive Markit flash on US manufacturing has held up the market. This week’s new home sales, jobless claims and US GDP will spur further debate whether the weather clouded data and should the Fed reverse its tapering program with evidence of underlying weakness.

Tonight’s trading will be watched closely as it hovers near the resistance level. Investors would like to see the benchmark pushed higher with momentum to follow through.

Investors will be watching out for a raft of data this week including: German GDP, UK GDP and US GDP. US GDP is forecast to be downgraded on weak consumer spending to a mid-2% for the final quarter last year.

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