AM Report 11th March 15

ajz

The offshore session was largely void of economic data releases, which left the focus on what now appears to be virtually
inevitable U.S rate rises this year. The strongest run of U.S. jobs growth in over 2 decades has cemented those expectations.
Thus after having the wind at their back for 6 years global equity markets now face the prospect of more inhibiting conditions
going forward. In Europe, Greek concerns were to the fore with the Eurozone finance ministers urging Greece to stop wasting
time and get moving on identifying economic reforms that satisfy its international lenders — a prerequisite to unlock the next
tranche of financial aid to Greece. The country is at risk of running out of cash later this month, unless it receives more funding.
The Stoxx600 ended the session down 0.90% . Stateside, it was red ink right out of the blocks and selling intensified late in the
session to see the S&P500 end on its lows, down 1.68%. the Dow fared slightly worse, shedding 328 points or 1.83%. The Dow
and the S&P are now in negative territory for the year.
The equity market falls have seen other markets behave in a ‘risk averse’ fashion. In currencies it has seen that expressed in
sharp cross/JPY losses as the Yen benefits from safe haven flows. Meanwhile the EUR/USD has fallen to new 12 year lows
(April 2003) as the German 10 year bond yield closes at record lows of 0.235%. This makes the U.S.-German 10-year yield gap
the widest since 1989! We’ve always maintained that, all else being equal, relative interest rate differentials still are the primary
motivator of currency moves. Interestingly the NZD continued to drift off against the strong USD but was relatively unscathed
against the crosses despite yesterday’s news.
The U.S. JOLTS job openings series showed continued strength in the U.S. labour market with around 5 mln job openings
available at the end of January. This is the most since 2001 (and purportedly one of Yellen’s favourite indicators).
The rampant USD was bolstered in late Asian trade yesterday after the Fed’s Fisher said it would be better to raise interest rates
"early and gradually than late and steeply".
The U.S. wholesale rate curve fell in yield terms as global investors search for income as European yields drop sharply on the
implementation of the ECB’s bond buying program along with a flight to safety as equity markets look overdue for a healthy 10%+
correction. The U.S. note year note yield is off from 2.19% to 2.12%.
The global commodities index dropped 1.3% led by a decline in WTI Crude which has fallen 2.8% in offshore trade. Tonight we
will see data that is very likely to show U.S. crude stocks lifting by about another 5mln barrels, when already at 80 year highs.