Global Wrap - We Call The S&P/ASX 200 Up 44

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European stocks rose, bouncing back from last weeks’ losses, led by a sharp move higher in Chinese shares and positive
Eurozone sentiment readings. Tech shares also played a big part, rallying after M&A talks in the industry spurred rallies in the
sector. The latest tech led rally follows news late last week that U.S player Intel is in talks to buy fellow chipmaker Altera in a
deal likely to top $10 billion. Sentiment in the U.S. session was even more buoyant with a rash of deals in the health care sector
driving gains. Stocks rose from the opening bell with the Dow up almost 300 points at one stage. The rally was built on relat ively
light volumes as financial year end and the upcoming Easter break both played a part. The EuroStoxx600 ended up 1.09% whilst
the Dow has ended up 267 points or 1.50%. Regarding the Dow, it is up about 0.5% for the quarter and a weak close tomorrow
could give the index its first negative quarter in nine.
Confidence in the Eurozone's economy rose for a 4th straight month in March to its highest since July 2011, suggesting the weak
euro and lower oil prices are spurring the recovery. The European Commission's economic sentiment indicator rose by 1.6 points
to 103.9, better than the 103.1 economists had forecast. The EC expects the euro zone's economy to grow 1.3% this year and
1.9% in 2016.
German inflation has crept back into the positives, just, coming in at +0.3%, well below the targeted 2.0% but considerably higher
than the annualised -0.4% seen in January. A collective sigh of relief from European policy makers then.
The U.S. inflation measure, core PCE (personal consumption and expenditure), came in a touch higher than expected at +1.4% v
+1.3% expected. The rise is helpful for the Fed’s targets but still well below the 2.0% target. This month’s jump halts a 3 month
decline.
U.S. pending home sales rose in February to the highest level since June 2013. The index, which is based on contract signings
for purchases of existing homes, increased 3.1% to a seasonally adjusted level of 106.9 in February from an January’s
downwardly revised reading of 103.7. Economists had expected pending home sales would rise 0.5% last month. Home sales
typically close within a couple of months after signing. The index has increased in three of the past four months. The figure was
up 12% in February from a year earlier.
The USD was stronger across the board with the AUD bearing the brunt of the resurgent strength. It was a rather odd offshore
session in many ways as the dollar rally comes at a time when the market moves to reduce the odds of a near term Fed rate hike.
The market has all but priced out a June hike whilst a September hike had it odds reduced from 80% to 72% overnight. The AUD
/USD pair has lost in excess of 3 cents since mid-last week as the market is now pricing a 70% chance of a rate cut at next
week’s April meeting. As a result the NZD/AUD cross moved to new multi-decadal highs of 0.9845 (AUD/NZD low 1.0157) as the
NZ-AU 2 year swap spread moved to 160bps, their widest level since August 2007.

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