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Proprietary Trading Weekly Market Recap For Friday, Mar. 14, 2014

Stock are Jolted as Tensions Mount Ahead of the Weekend

Stocks experienced a rollercoaster ride during this past week as investors began to exit riskier assets ahead of a referendum vote by Crimea on whether to stay as part of Ukraine. Economic in China continued to show that the second largest economy was weakening while US data showed that the weather during January really did generated headwinds for the world's largest economy.

Crimea's parliament has voted to declare independence from Ukraine ahead of a referendum this weekend in which the region's citizens will decide whether to join Russia. The parliamentary ballot highlights the continued stalemate in the crisis. The people are likely to pass the referendum which will generate additional tensions in the region as Russian dominates the peninsula and is unlikely to back off despite calls from the EU and the US to leave Ukraine sovereign issues alone.

China has released more data indicating that its economy is slowing, with industrial production growth easing to 8.6% on year in January and February from 9.7% previously and missing consensus of 9.5%. Retail sales weakened to +11.8% from +13.6%, while urban fixed-asset investment also weakened.

Chinese exports dropped 18.1% on year in February after expanding 10.6% in January and badly missed consensus of +6.8%. However, the trend may have been distorted by the Lunar New Year holiday and fake invoicing that boosted the data a year earlier, while the severe winter weather in the U.S. may also have had an effect.

Also in Asian Japanese data was mixed. Japan has revised down its fourth quarter GDP to 0.2% from an initial 0.3%, with the economy held back by weaker-than-estimated capital spending and consumer spending. The current-account deficit increased to a record 1.59 trillion yen in January from 638.6 billion in December. Contrary to the GDP report, Japan reported a much larger than expected jump in machine orders, a proxy for capital investment. The 13.4% increase in the month of January was nearly twice the consensus forecast and bodes well for Q1 growth.

In the US, Retail sales came in stronger than expected at 0.3% month over month compared to the 0.2% climb expected by economists. Excluding autos, retail sales printed at 0.3% which was also slightly better than expected. Excluding autos and gasoline sales climbed 0.3%, in February. Revisions to the prior month showed a decline from 0.4% to a decline of 0.6%.

The National Federation of Independent Business (NFIB) Small Business Optimism Index declined in February to 91.4 from an unrevised 94.1 in January, and compared to the decrease to 93.8 that economists surveyed had expected.

Jobless claims performed better than expected for the week ending March 8, 2014. Jobless claims dropped 9K from 324K to 315K which was better than expected 323K expected by economists. Important prices climbed 0.9% which was in line with expectations. The better than expected claims data pushed US interest rates slightly higher, but did not change the trajectory of the Euro.

Next week investors will deal with the fallout from the referendum in Ukraine. Issues will likely escalate and generate additional volatility which could lead to an equity market correction.