Good morning! Here’s what you need to know.
The world braces for sanctions on Russia. Tensions between Russia and Ukraine have cooled, but there’s talk of sanctions after the Russian incursion into the Ukrainian region of Crimea. U.S. Secretary of State John Kerry will meet with Russian Foreign Minister Sergei Lavrov at a conference in Paris attended by the five permanent members of the U.N. security council.
China sets a growth target. The government targeted GDP growth of 7.5% and CPI at 3.5%, in line with expectations. The difficulty is that by setting a such a high goal, China isn’t leaving much room to reform the economy, as CNBC’s Deirdre Wang Morris pointed out.
Growth in the eurozone picks up. The latest services and composite PMI data out of Europe indicates a general drift higher for its economies. At 56.4, German PMI hit a 33-month high and at 53.4, Italian PMI reached a 34-month high. The French economy proved to be the drag, coming in at 47.9 (anything below 50 signals contraction).
It’s a busy day of economic data, starting with the ADP Employment Report at 8:15 a.m. ET. Economists expect private payrolls increased by 158,000 in February. “Though ADP employment rarely forecasts the BLS jobs number with precision, it is nevertheless statistically superior to any of the other high frequency payroll predictors such as jobless claims or ISM data,” wrote Credit Suisse economists. “Aside from what it means for payrolls, we also consider it an important labour market gauge in its own right given its large sample size. Interestingly, ADP has held up well in recent months even as the BLS payroll data have slowed (three month averages:230K ADP vs 168K BLS private).”
Then at 10:00 a.m., ISM Non-Manufacturing will be released. Economists are expecting ISM services fell to 53.5 in February from 54.0 in January. “The evidence from February’s regional services sector surveys was mixed, however, with the Richmond Fed index edging higher and the Dallas Fed dipping,” Capital Economics’ Paul Ashworth and Paul Dales wrote clients. “Nonetheless, they both remain at a fairly low level. Otherwise, we suspect that the harsh weather played some role in dampening overall conditions.”
The Fed will publish its monthly Beige Book at 2:00 p.m. Credit Suisse economists highlight: “The March 5 Beige Book may feature the return of the ‘modest-to-moderate’ growth language that was absent in January but used in every previous report back to last spring. After painting a more upbeat picture of the US economy in its January Beige Book, the Fed in next week’s report may describe more sluggish activity. Of interest to the market will be the extent to which disruptive weather is cited by the Fed’s business contacts.”
Global markets take it easy. After an up-and-down week spurred by the situation in Ukraine, markets were calm in overnight trading. Japan’s Nikkei climbed 1.20% and Korea’s KOSPI grew 0.88%. European markets were slightly lower and U.S. futures were pointing south.
Smith & Wesson crushes earnings. The gunmaker announced third quarter net sales of $US145.9 million, up 7% from the year-previous quarter. Handgun sales jumped 29.9% year over year.
The stock is up 10% in after hours trading.
China has its first major corporate debt default. Shanghai Chaori Solar Energy Science and Technology Company announced that it cannot pay interests to the tune of 89.8 million yuan ($14.6 million) on its 11 Chaori bond due on March 7. “Defaults of some debt products are not on a similar scale to a collapse of a major financial institution. As we think corporate bonds and incoming trust loan defaults will not lead to a credit crunch, and we are reasonably confident with our 7.6% GDP growth forecast for this year,” according to Bank of America’s Ting Lu. The
news has, however, caused corporate bonds to fall, and is “a negative for riskier debt products,” writes Ting.
Japan eyes Bitcoin regulation. After the spectacular failure and bankruptcy of MtGox — the Tokyo-based Bitcoin exchange — Japanese authorities will clarify their view on the cryptocurrency, the WSJ’s Takashi Mochizuki and Mitsuru Obe report. “People familiar with a draft being prepared for a cabinet meeting Friday say the government will reaffirm that Japan doesn’t consider bitcoin a currency, the basis for the argument by Japan’s banking watchdog, the Financial Services Agency, that bitcoin shouldn’t be subject to its oversight,” they report. But the draft does reportedly say Bitcoin would be subject to a tax in Japan.