Market sentiments continued to be weighed down by situation regarding Ukraine. US equities closed nearly flat with DJIA up 13.87 pts, or 0.08%, at 16443.34 and S&P 500 up 0.03 pts, at 1920.24. Asian equities, however, are broadly lower extending the third day of decline. Yen extends the rally against other major currencies. In particular with the USD/JPY breaching 102.03 minor support, indicating prospect of further up side. Australia dollar was additionally pressured by the unexpected fall in employment and the sharp jump in unemployment rate. Euro and Sterling recovered against the greenback ahead of ECB and BoE announcement.
Tensions in Russia-Ukraine border intensified with Russia's Defense Ministry staging a week of military exercises in Russia's southern Astrakhan region, approximately 500 miles from the border with Ukraine. Meanwhile, Russian President Putin has banned agricultural imports from countries imposing sanctions on Russia. While the list of product bans is not confirmed, it would inevitably affect countries especially those in Europe as Russia is Europe's largest importer in value of animals, meat, dairy products, fruits and vegetables. Certainly, Russia's economy would also be affected given goods from the EU represent 16% of all Russian imports. The ban would push inflation of the country to even a higher level.
Released from Australia, unemployment rate jumped sharply from 6.0% to 6.4% in July, hitting a 12 year high. Also, that's the first time Australian unemployment rate surpassed that of US since 2007. Total employment also unexpectedly dropped -0.3% versus expectation of 13.5k. Full time job rose 14.5k while part-time jobs contracted 14.8k. Participation rate, jumped slightly from 64.7% to 64.8%. RBA maintained its neutral stance earlier this week, signaling interest rates would be kept at the record low of 2.50% for a while.
In China, in the quarterly Monetary Policy Report for 2Q14, the PBOC acknowledged that economic growth was stable in the first half of the year and expected growth would improve in the second half. It also delivered a more hawkish view over inflation and noted the debt levels have risen too fast. On monetary policy outlook, the central bank reiterated its neutral stance. In our opinion, rising inflation concerns might present limitations for the PBOC to adopt aggressive easing while recent improvements in economic data might have reduced the need for doing do. However, more easing measures are still likely as the government struggles to achieve the growth target of 7.5% this year. More in China To Maintain Neutral Monetary Stance, Raised Concerns On Inflation.
The focus of today is ECB's monetary meeting. While it's widely anticipated that the members would stand on the sideline in August, we look for Preside Draghi's addresses over the issue related to the impacts of sanctions against Russia on the Eurozone, as well as the banking crisis in Portugal's banking sector. The BOE would also leave the Bank Rate at 0.5% and asset purchases at 375B pound on Thursday. The minutes and the quarterly Inflation Report released later this month should give more indications on the monetary outlook. the market is expecting the first rate hike to come in 1Q15.
Elsewhere, Swiss SECO consumer confidence and foreign currency reserves, German industrial production, Canada building permits and Ivey PMI, US jobless claims would be released today.