20140228

Good morning,

It is the last trading day of February and overall, it has been a good month for risk takers as stocks have increased from late January on a combination of decent earnings as well as speculation that the Fed will have to change the monetary policy in order to sustain the economic growth projections.  Yesterday, Fed's Yellen gave her first assessment on the state of the US economy in the Semiannual Monetary Report to the Congress. She maintained that fundamentals are looking good, but the economy is years from operating normally, and as the unemployment and inflation targets are well below those of the Fed's the monetary policy should be kept accommodative. This had a positive effect on risk taking in the US, where indices managed to outweigh a negative European session - EURO STOXX 50 closed down 0.4% yday, while US indexes were up around 0.5% - Nasdaq leading the pack up 0.6%.

In Asia, the tides turned again as risk aversion was dominant in light of the possible restrictive actions by the PBOC in order to limit speculative flows. This took it's toll on shares, where the Hang Seng lost 0.6%, ASX down 0.1% while the Nikkei lost 0.04%.

Today, Europe has opened in negative, but strong German January Retail Sales have pushed them into positive. Watch the E-Z Feb CPI figures at 10GMT, where we could see some reaction in EU shares and the EUR, should the figures deviate from the expected 0.7% YoY figure. In light of yesterday's weak German inflation figures, we could see some EUR-selling in anticipation of a weak figure.

Key figure today, will be the preliminary Q4 GDP from the US, released at 13:30GMT. At the same time, the Canadian Q4 GDP is released, so we could see a double-whammy in USD/CAD, should the figures be aligned for similar direction in the pair. Later, Chicago PMI and the Michigan Consumer Confidence could also move the markets as we have seen before ahead of the week and month end.