Ukrainian Premier Arseniy Yatsenyuk yesterday urged Russian President Putin to pull back his military forces, warning that the two nations were “on the brink of disaster.” Manufacturing expanded at a faster pace than projected in February, as The Institute for Supply Management’s manufacturing index rose to 53.2 last month from 51.3 in January. In addition, European manufacturing expanded more than in February than previously estimated.
Equities: Our key line in the sand is 1852 in the E-mini S&P 500 (CME:ESM14). The market gapped lower last night on news that Russia has placed military inside Ukrainian borders. The market tried to rally to our key area of 1851/1852 this morning, but was rejected before even hitting 1850. We have been writing recently that 1851 is a very key level for us, and that as long as the market is above 1851, it would look technically very bullish to us. This morning however, the market broke 1840 to the downside, and is looking vulnerable to more selling, in our view. Our next key moving average level is 1825.
Bonds: The MAR14 U.S. 30-year bonds (CBOT:ZBM14) are up 19 ticks to 133’21, likely experiencing “safe-haven” flows as a result of the Ukraine situation. However, today’s economic numbers provided more evidence that the US economy seems to be on a good path. We think that the geo-political situations outweigh the economic data at this point. We believe bonds could continue to rise until we see some sort of peaceful resolution to the Ukraine-Russia situation.
Currencies: The MAR14 U.S. Dollar Index (NYBOT: DXM14) rallied this morning, up 23 ticks to 79.95. The MAR14 Euro (CME:E6M14) had a slight sell-off, trading down 59 ticks to 137.63, which is a key daily pivot level. The MAR14 Japanese Yen (CME:JYM14) rallied overnight, almost puncturing the 99 level, but is now up 33 ticks to 98.58. The MAR14 Swiss Franc (CME:SFM14) popped higher overnight, trading all the way up to almost 1.14, but is now down 35 ticks to 113.55. Overall, we believe the Yen could have a strong week this week, especially if the S&P 500 heads lower. We believe the USD may also have a strong week as investors may flock to the most stable country, the United States.
Commodities: Commodities, overall, have really had a volatile and for the most part very strong start to 2014. Today, the grain markets, led by MAY14 wheat (CBOT:WK14) and MAR14 corn (CBOT:CK14), likely as a result of the Ukraine situation. Wheat had a monster rally this morning, up about 5% to $6.35. Energy markets also really rallied hard this morning, with APR14 WTI crude up 2.2% to $104.93. APR14 heating oil also had a big rally this morning, trading up over $0.07 to $3.0892. Oil can continue to head higher, especially in light of the global tensions. APR14 gold is up over $30 this morning to $1,352. Gold has room to run higher, possibly to $1,365.