A relief rally to start the week

The markets reacted in a positive mood at the start of the trading week, mainly on relief over the lack of violence in the Crimea with the European and US stock markets registering strong gains and risk appetite driving forward the high yielding currencies like the Australian and New Zealand dollars.

In yesterday’s referendum, approximately 96% of the population of the Crimea voted to rejoin Russia, despite the G7 promising not to recognise the outcome.

The US has already officially declared the referendum illegal and President Barack Obama promised that the vote would never be recognised by the US or the wider international community.

Whilst the situation remains volatile and tense, most analysts are taking the view that a serious escalation is unlikely given that ‘everyone has too much to lose and too little to gain’.

In the UK, ahead of tomorrow’s budget, property website Rightmove reported that asking prices for homes in the UK rose by another 1.6% between February and March to hit a new record high of £255,962 on average.

Miles Shipside, Rightmove Director and housing market analyst commented that “The mass property market is starting to unlock after years of being handcuffed by fragile consumer confidence and a lack of low-deposit mortgages”.

Another report, this time in the FT reported on a new phenomenon in the London and south-east market. Known as ‘ghost gazumping’, such is the demand for property that sellers are now increasing asking prices just before the exchange of contracts on the sale of a property even without a counter-offer being in place.

The euro had another strong session, rising across the board despite some further bad data out of the region. Eurostat reported that the preliminary estimate for consumer price inflation in the euro zone during February has been revised slightly lower to 0.7% from the initial reading of 0.8% and even further away from the target rate of 2% held by the European Central bank (ECB). Analysts have long warned that the euro zone faces a damaging Japanese style period of deflation unless action is taken quickly to counter this issue.

The US dollar rallied yesterday afternoon after data showed that US industrial production expanded at a much faster rate that had been anticipated by analysts of 0.6% month-on-month during February.

Meanwhile, the National Association of Home Builders (NAHB) reported that the US home price index rose to 47 points for February from a reading of 46 in January.

The NAHB commented that the underlying trends in the sector in February were similar to those observed in January as firms continue to be adversely affected by poor weather and the difficulty in finding lots and skilled manpower while prices for materials are rising.