The Crimean situation appears headed for its drop scene, with
Russia annexing this breakaway Ukrainian region. But markets
appear willing to buy into President Putin's assurances that his
country had no designs on the rest of Ukraine.
Data on the home front this morning shows some improvement in
the housing market and still no signs of inflation in the
economy. The Fed is also in the spotlight, with the two-day FOMC
meeting getting underway today.
In his almost hour-long speech to the Russian parliament,
President Putin defended the Crimean developments and compared
the situation to the German reunification. As was widely
expected, he signed the treaty combining Crimea with Russia.
Global markets were surprisingly reassured by his comments that
Russia favored the territorial integrity of Ukraine and had no
designs on any parts or regions of that country.
U.S. futures turned green after these comments hit the wires,
having been modestly in the red all morning. Hard to tell how
sustainable this favorable market sentiment will turn out to be.
But his comments appear to have eased concerns, for now at least,
that Russia wouldn't follow up its Crimean actions by making
moves on Eastern and Southern parts of Ukraine.
Russia aside, we got modestly positive Housing Starts and
non-threatening CPI data. Housing Starts were a tad lower than
expected, but Permits -- which tell us about future home
construction activity -- showed a lot of strength. The mixed but
nevertheless favorable home construction data follows recovery in
the homebuilder sentiment index yesterday and reconfirms that the
sharp fall-off the month before was primarily due to this year's
unusually harsh winter.
That said, activity remains short of pre-winter levels and
likely points toward other headwinds facing the home construction
market like shortage of building lots, skilled labor and low
inventory of new homes. Interest rates, while low by historical
standards, have also gone up from the year-earlier level,
weighing on affordability metrics.
The market had a very strong day on Monday and appears on
track to have a positive open, thanks to the non-threatening
comments from Putin and favorable-looking economic data. The
market's overall movement year to date has been no different than
a roller-coaster ride, not that far from where we started the
year. With the first quarter coming to an end in less than two
weeks, this could very well be a sign of things to come.
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