US equities staged a strong rally on the first day on March with DJIA closed up 348.58 pts, or 2.11%, at 16865.08. S&P 500 also rose 46.12 pts, or 2.39% to close at 1978.35. Asian equities follow with Nikkei trading up 650 pts or 4%, Hong Kong HSI up 520 pts or 2.6%, China SSE (LON:SSE) up 60 pts, or 2.2%. Crude oil is relatively steady, though, and continues to struggle around 34 handle, lacking momentum to push through 35. Gold is also bounded in recent range between 1200/50. In the currency markets, Aussie is leading the way higher on risk appetite and lifted additionally by stronger than expected GDP data. Canadian dollar's rally carries more significant technical implications as USD/CAD broke 1.3456 key support. Meanwhile, Euro remains the weakest one on expectation of further ECB easing.
The return of risk appetite is firstly seen as a result of stabilization of oil prices after producers joined to freeze productions. Secondly, there are expectations of more easing from global central banks. PBoC lowered the so called bank reserve requirement ratio this week and is expected to do more ahead. (China Watch: PBOC Moves RRR Lower, Further Step To Inject Liquidity And Add Monetary Easing). ECB is widely expected to reconsider the stimulus measures in the regular meeting next week March 10. There is high chance that ECB would announce new easing. There are also speculations that BoJ would expand easing in March meeting too. Meanwhile, there is practically no chance for Fed to raise interest rate in March and markets are only pricing in 34% of hike in June.
The development in US equities carry important technical implications. Right now, it's confirmed that key long term fibonacci level of 38.2% retracement of 10404.49 to 18351.36 at 15315.65 was defended. The development suggests that price actions from 18351.36 are merely developing into a sideway consolidation pattern, likely in form of a triangle. If that's correct, it's not time for a break out yet and some more sideway trading would be seen. But any downside attempt would be contained above 15315.65. And the long term up trend would resume with at least a brief break of 18351.36.
In Eurozone, ECB president Mario Draghi said in a letter to European lawmaker that he pledged to "review and possibly reconsider" the EUR 1.5T quantitative easing program. He noted that the review "has to be seen against the background of increased downside risks to the earlier outlook amid heightened uncertainty about emerging market economies' growth prospects, volatility in the financial and commodity markets, and geopolitical risks." And, "in this environment, euro area inflation dynamics continue to be weaker than expected." Meanwhile, there are "a variety of instruments at its disposal," and that "there are no limits to how far we are willing to deploy our instruments within our mandate to achieve our objective."
Moody's lowered outlook on the Aa3 Chinese government debt to "negative" from "stable" today. The rating agency noted that "without credible and efficient reforms, China's GDP growth would slow more markedly as a high debt burden dampens business investment and demographics turn increasingly unfavorable. Government debt would increase more sharply than we currently expect." It noted that "interventions in the equity and foreign exchange markets over the past year suggest that ensuring financial and economic stability is also an objective, but there is considerably uncertainty about policy priorities."
On the data front, Australian GDP rose 0.6% qoq in Q4, higher than expectation of 0.5% qoq. Prior quarter's figure was also revised up from 0.9% qoq to 1.1% qoq. Japan monetary base rose 29.0% yoy in February. Swiss will release Q4 GDP in European session while UK will release Construction PMI. Eurozone will release PPI. From US, main focus will be on ADP employment report and Fed's Beige Book report.