Russian invasion continues to spook markets


Financial markets were again rattled by the events coming from Ukraine.

News that Russia's military presence was growing in Crimea, a region in Ukraine, weakened sentiment, and was despite some stronger-than-expected economic data in the US.

Share Markets:

European markets were heavily hit, with the Euro Stoxx falling 3.0%. Meanwhile Russian equities and stocks in companies with exposure to Russia plunged.

In the US, losses were less pronounced. The Dow and S&P500 both fell 0.9%, and the Nasdaq dropped 0.7%.


The military action in Ukraine boosted demand for safe-haven assets, and saw US treasuries rise (yields fall).

Yields on 10-year notes fell to their lowest in four weeks.

Foreign Exchange: 

Risk aversion was supportive of the US dollar, which rose against a basket of currencies.

The Russian ruble fell to a record low and other emerging market currencies came under pressure in reaction to the geopolitical tensions. 

However, despite weaker risk appetite, the Australian dollar was resilient and is currently trading at 0.8931.


The geopolitical tensions pushed higher the prices of gold, oil and grains.

Copper prices, however, continue to be weighed down by concerns of softer demand from China following weaker manufacturing data over the weekend. 


Company operating profits rose 1.7% in the December quarter.

This saw the annual rate climb to 10.7% in the year to the December quarter, from 8.8% in the year to the September quarter.

The increase in company profits was driven by the mining sector, with company profits excluding mining slipping 0.5% in the December quarter.

Inventories fell in line with our expectations, down 0.5% in the December quarter, after a similar decline in the September quarter.

This implies inventories will make a slightly positive contribution to GDP growth in the December quarter.

The RP Data/Rismark dwelling price index was steady in February. Australian capital city house prices fell 0.2% in February, while unit prices rose 1.0%.

Unit prices rose 8.4% in the year to February, while house prices gained 9.7% over that time frame.  Over the year to February, house prices rose in all capital cities, except Canberra, where they fell 0.1%.

HIA new home sales rose 0.5% in January, after falling 0.4% in December. The increase was driven by unit sales and by State, Victoria saw a strong rebound.

ANZ job ads jumped 5.1% in February, following a flat result in January (previously reported as a 0.3% decline).

The annual rate of job ads growth improved to a decline of 4.8% in the year to February, from a fall of 8.9% in the year to January.

The TD-MI inflation gauge rose 0.2% in February, taking the annual rate up to 2.7% in the year to February, from 2.5% in the year to March.

This measure of inflation is now in the upper half of the RBA's 2-3% target band.

The AiG performance of manufacturing index rose to 48.6 in February, from 46.7 in January. However, the index remains well below 50, indicating that manufacturing industry activity continues to contract.

The detail indicates that manufacturing margins remain under pressure and the employment subcomponent deteriorated further in February, as did manufacturing exports.


The official non-manufacturing PMI rose to 55.0 in February, from 53.4 in January.

The HSBC-Markit manufacturing PMI, fell to a seven-month low of 48.5 in February, from 49.5 in January.

The reading below 50 indicates manufacturing activity contracted in February. The employment sub index fell to its lowest since March 2009, while the new orders subcomponent was also in contractionary territory.


Euro zone's PMI factory index was revised up from 53.0 to 53.2 in February's final reading.

The index was still down 0.8 points from January (54.0), which was its highest since May 2011. Both the French and German PMIs were revised higher, although France remained mildly contractionary at 49.7.

Among other nations, the Italian PMI was down 0.8 points from January to 52.3 February, while Spain rose from 52.2 to 52.5 over the month.

The European Central Bank (ECB) appears ready to take action to loosen lending conditions, given the deflation risks present. ECB President Draghi reiterated that a BoE style funding for lending scheme "is certainly one of the instruments that we have in our artillery" even as he suggested there was "some improvement" in credit flows from the banking sector to the real economy.


Capital spending rose 2.8% in Q4, taking the annual rate up to 4.0% in the year to the fourth quarter, from 1.5% in the year to the third quarter.

New Zealand:

The terms of trade were higher than expected, rising 2.3% to a new 40-year high in Q4. This followed a 7.5% jump in the terms of trade in Q3 last year. For the year to the fourth quarter, the NZ terms of trade jumped 20.0%.

United Kingdom:

The PMI factory rose from 56.6 to 56.9 in February, still close to two year highs.

In other data, house prices accelerated to 5.4% in the year to February, the fastest annual pace of gain since 2007 on the Hometrack index.

United States:

The ISM factory index rose from 51.3 to 53.2 in February. Despite the month's improvement, the index is still weaker than in the second half of 2013.

Among the sub-indices, production fell from 55 to 48 in February, new orders recovered 3 points after a 13 point drop in January, and employment was steady at the recent low of 52.3.

US personal income rose 0.3% in January after stalling in December, consistent with the renewed gains in hours worked and earnings that month. 

Personal spending rose 0.4% after a revised 0.1% gain in December. Falling durables and non-durables spending was offset by a 0.9% surge in services spending, mostly heating and health insurance.

The core PCE deflator posted its seventh straight 0.1% rise to be up 1.1% in the year to January, the lowest since the deflation scare days of just over three years ago.

US construction spending rose 0.1% in January after a revised cumulative gain of over 4% in the previous four months.

A 0.9% increase residential spending was offset by a 0.3% fall in the non-residential component.

These results add to the mixed data on residential housing after a fall in housing starts, rising sales of new homes and construction jobs bouncing.

A clearer picture on US housing may not emerge until the weather-impacted data passes.

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