Global Manufacturing PMI continues to improve positively.
Upcoming or expected improvement in macro data.
“It is possible that GLI will return to Expansion as early as next month. According to our forecast, the most likely forward trajectory for the global cycle is a return to the Expansion phase. Macro data out of Europe remain fairly solid. And even the US data, while at the moment a source of weakness in the GLI, may already be showing some signs of stabilization. For example, February ISM improved relative to the January print, and personal income and consumer spending both bested expectations. If these trends continue and the weather-induced aberrations are rectified further, it is possible that the GLI will return to Expansion even as early as the next month.” (Goldman Sachs)
ADP National Employment Report: +139K in February vs expectations of 150K. Major revisions to previous numbers, with the most recent months revised sharply lower as those months further back are revised significantly higher. Originally reported as a gain of 175K, January is cut to 127K. December cut to 191K from 227K, November raised to 245K from 215K, October to 196K from 130K, September to 215K from 166K.
“The ADP report has yet to prove itself as a particularly reliable predictor of the official nonfarm payrolls report.” (Goldman Sachs)
“Investors have stopped rewarding low valuation stocks. Our Valuation Micro Equity Factor, which measures the sector-neutral performance of low vs. high valuation S&P 500 stocks, rose by 15% in 2013. This trend has reversed in 2014, however, with low valuation stocks underperforming by nearly 500 bp YTD.” (Goldman Sachs)
“Ukraine’s impact on energy markets likely limited – potential sanctions against Russia would likely have larger impact on energy prices given country’s large production and exports. We find that while European natural gas prices rallied sharply yesterday (having retraced some of those gains today), there are no fundamental reasons for concern as most Russian natural gas bound for northwest Europe bypasses Ukraine to the north. Similarly, crude oil flows through Ukraine are generally small relative to the global market and are therefore unlikely to impact the global oil balance. Assessing agriculture spillover from Ukraine – corn and wheat markets most exposed – global stocks sufficient to offset modest disruptions – sanctions against Russia would likely have larger impact on agriculture prices given country’s larger production and export share of global wheat and oilseed markets. While potential export or spring planting disruptions could support prices in the near term, global inventories appear sufficient for both corn and wheat to offset modest disruptions.” (Goldman Sachs)