The Daily Difference: Market Update March 3, 2014

Economic Calendar for the week of March 3, 2014. Monday, March 3

  • Personal Income and Outlays: Personal income was decent, up 0.3% vs. a consensus number of 0.2%; this was a relief given the 0 growth number in December. Consumer spending appeared robust: 0.4% vs. a consensus of 0.1%; however, December was downwardly revised from 0.4% to 0.1%. NET ZERO. In addition, the majority of the increase was in services, specifically healthcare, which is seen as a byproduct of the Affordable Care Act and not a sustainable indicator consumer demand. Hmmm. We’ll blame this one on the weather too.
  • ISM Manufacturing Index: A reading of 53.2 vs. the consensus number of 51.9 indicates a bounce in manufacturing after a slow winter. The underlying numbers are encouraging: a contraction in shipping (very dependent on weather) was more than offset by growth in new orders and new export orders.

The remainder of the week focuses on employment...

  • Wednesday, March 5 > ADP Employment Report (I won’t beat a dead horse...we’ve discussed this report’s lack of credibility numerous times).
  • Thursday, March 6 >  Jobless Claims
  • Friday, March 7 >  Employment Situation

So, why is the market down roughly 1%? UKRAINE! An overview...

Protesters took over Maidan Square in Kiev, demanding the President (Viktor Yanukovych) step down. After nearly 80 deaths at the hands of snipers and unidentified government “thugs,” Yanukovych fled the country. Although his whereabouts, a la Mark Sanford, were not known, many said he fled to Russia. Although Yanukovych and Putin were known to have a strained relationship, it was widely known Yanukovych was supported by his Russian neighbors.

Another successful political protest, not unlike the handful we’ve seen in other parts of the world over the last 12 months, right?

Not quite. Despite the initial success of the Maidan protests, Russia quickly moved in to take control of Eastern parts of Ukraine. Divided between two major factions (the Eastern nationalists who wish to join the EU and the Western Russian supporters), Russia quickly took control this weekend of the Eastern part of the country. The Crimean region, heavily Russian, is now controlled by the Russian military; in addition, the head of the Ukrainian Navy has pledged support for the Russians. The Russians have given the Ukranians until 10:00 PM EST tonight to surrender forces in Crimea or “face a storm.” From an economic standpoint, Ukraine is not incredibly significant (their economy is roughly the same size as Peru’s); however, it is Western Ukraine’s ties to NATO, the EU, and the West that has global financial markets nervous.  Facing the most tension in the region since the 1991 breakup of the Soviet Union, any type of military action in Western Ukraine would likely result in NATO and Western involvement. Hold on and let’s hope this crisis ends as quickly as it started!

BlogJames O'Brien