Trader Talk: An Analysis of the Markets this Morning

Good Morning

Markets opened marginally lower this morning, on the back of disappointing economic data coming out of China, re-igniting concerns that a weaker property market in this region could result in a marked decline in demand for global commodities, namely copper. Gold and silver also declined.

Whilst economic growth in China has disappointed, the same cannot be said for the Eurozone and the US, with the Eurozone in particular faring better than most would have expected. Recent data has in fact indicated that Germany’s economy expanded at a faster pace in the final quarter of 2013 than the previous three quarters.

Meanwhile, the Turkish Lira weakened for a second day as the main opposition party called on Prime Minister Erdogan to step down on accusations of wiretapped conversations and wrongdoings.

Elsewhere in peripheral Europe, Ukraine investors welcomed parliament’s ousting of President Yanukovych, sparking a 2-day bond rally. However, interim leaders are still pondering moves on raising as much as $35bn worth of financial aid. The International Monetary Fund, US and EU have so far pledged to help Ukraine, adding further impetus in the recent bond rally. Despite this, in the short term, the greatest challenge will be to prevent capital outflows and curb the loss of foreign reserves which could continue to hamper the Ukrainian economy, which is currently recovering from its third recession since 2008.

Protests against lack of basic goods, rising inflation (the world’s largest) coupled with increasing crime rates in Venezuela seem to be threatening Maduro’s grip at the helm, with borrowing costs rising sharply over recent weeks. Despite boasting the world’s largest oil reserves, Venezuela's underlying state of the economy remains in a perilous situation, as Maduro continues to implement policies adopted by this predecessor Hugo Chavez and the party’s brand of socialism. This has led the country to be highly dependent on oil reserves.

The issue here is that problem countries like Ukraine have managed to get the US and EU on their side. Venezuela is just short of allies having the financial prowess, making the struggle for liquidity a tad harder.

Have a nice day!

Mark Vella