US GDP expected to be revised higher

Good morning,

• US futures lacking direction ahead of the opening bell;

• G7 discussing further sanctions on Russia;

• US GDP expected to be revised higher;

• Any positive pending home sales number likely to be well received.

US indices are expected to open relatively unchanged on Thursday, with the S&P seen down 4 points, the Dow up 9 points and the Nasdaq flat.

The lack of direction in the markets, which has been apparent for a couple of weeks now, is clearly being driven by the uncertainty surrounding the crisis in Crimea. The progress here has been slow and minimal, which doesn’t fill me with hope going forward that anything will be resolved. The only hope we have, it seems, is that it drops out of the headlines and moves to the back of traders’ minds as they begin to view it as less of a threat.

US President Barack Obama has warned that there are more sanctions to come but based on what we’ve already seen, this is going to do nothing to discourage Vladimir Putin from entering other parts of the Ukraine, if of course he decides he wants to, and certainly won’t convince him to hand Crimea back to the Ukraine. One thing that could hurt Russia is sanctions on imports of Russian oil and natural gas, as the economy is heavily dependent on it. However, until the G7 comes up with a way to do so without driving up prices and plunging Europe back into recession, this is not going to happen.

On the bright side, we are seeing a little more focus on the fundamentals in recent days, with encouraging US consumer data on Tuesday, for example, driving markets higher. There’s plenty of economic data being released again today, which will hopefully provide a little direction for the markets again.

Ahead of the open we’ll get the final fourth quarter GDP reading for the US, which is expected to be revised higher to 2.7% following last month’s downward revision to 2.4%. While it has been a slow start to the year from an economic data standpoint, with the weather being blamed for the slowdown in many areas of the economy, a figure around 2.7% for the fourth quarter would be an encouraging sign that the US can hit its 3% target this year. Especially as the growth came at a time when the government was spending less, consumers spending more and businesses increasing their investment. I expect that trend to continue now throughout 2014.

Also being released before the opening bell on Wall Street is the weekly jobless claims number. The impact that this number has on the markets has been diminishing in the last year or so, with more attention being paid to job creation that losses. This is understandable given that we’re now in the recovery phase and in fact, it reflects the fact that we’ve seen a long period of consistently low jobless claims figures, barring the occasional spike. The fact that this is no longer a worry, and therefore doesn’t impact the markets so much, is a positive thing.

Finally today we have the pending home sales number for February. This number tends to be very volatile on a monthly basis and can therefore be quite difficult to predict. A look at the previous months shows just how inaccurate the expectations for this number are, so to an extent, these should be ignored. Given how tough February was across the board, and given the drop in new home sales on Tuesday, albeit a smaller one than expected, I imagine the markets will be happy with any increase here.