* President Barack Obama's goals for the special Group of Sevent meeting were met Monday with the group's declaration that Russia is engaging in an "illegal" action by moving to annex the Crimea. The Obama and the leaders of Germany, France, Japan, Italy, the UK Canada said they "condemn the illegal refeendum held in Crimea" and "strongly condemn Russia's illegal attempt to annex Crimea" and do not recognize either. "We reaffirm that Russia's actions will have significant consequences," they said. The G7, meeting at the Hague, also reaffirmed the central role in support of Ukraine of the IMF and said they "remain united in our commitment to provide strong financial backing to Ukraine."
* There was little lasting markets response to the already discounted G7 statement as financial market remained in a holding pattern Monday, unwilling to press a new trend without additional stimuli. Stocks were the larger movers on the day as currencies, commodities and fixed income instruments traded in ranges.
* The Dow Jones Industrial Average Monday closed down 0.16% at 16,276.69, the Nasdaq Composite down 1.18% at 4226.385 and the S&P 500 down 0.49% at 1857.44. The Nasdaq Composite was down over 2% at one point earlier, weighed by losses in such stocks as Netflix (NFLX), Google (GOOG), Amazon (AMZN) and Facebook (FB).
* On the fixed income front, 10-year U.S. Treasury yields held around 2.7325% Monday, down from last Wednesday and Thursday's highs around 2.792%-2.793% and up from the 2.61% low yield seen March 14.
* In currencies, the euro closed at $1.3840 and dollar-yen at Y102.20, after trading in respective ranges of $1.3760 to $1.3876 and Y102.09 to Y102.09, with dollar-yen underpinned by euro-yen demand. Monday's euro rally was viewed as a short-squeeze, with several players caught short on the day, looking for $1.3750 (last week's lows at $1.3749) to give way.
* NYMEX May light sweet crude oil futures settled up $0.14 at $99.60 per barrel after trading in a $99.05 to $100.29 range. ICE Brent settled down $0.11 at $106.81 (range $106.45/$107.50).
* In other instruments, spot gold was closing around $1309.35/oz (range $1308.04/$1335.11), compared to Friday's close around $1334.70/oz. Last Monday's high near $1392.33 was the highest level seen since Sept 9.
* Production in the U.S. remained only slightly weaker than the near-three year high seen in February, according to the Markit manufacturing index Monday. Orders also continued to rise sharply, maintaining a strong pace after having already shown the largest monthly surge for nearly four years in February. At 55.1, the headline PMI was down from 57.1 in February, but the extent of the fall exaggerates the weakening of output and new order growth.
* A majority of a U.S. business economists panel believe the Federal Reserve will end its asset purchases in the last quarter of this year, with 40% saying they expect the first hike in the fed funds rate to come in the first half of 2015. The latest survey from National Association of Business Economists Monday represented the consensus of 48 macroeconomic forecasts and showed 57% believe asset purchases will end in the fourth quarter of 2014, in line with current Fed guidance. One quarter of respondents expect the large scale asset purchases will end prior to the fourth quarter, while 17% expect the asset purchase program will extend beyond 2014, although only 2% say it will persist into 2016 or later.
* The NABE survey also showed panelists upped their forecasts for GDP this year. Even with an expected a 0.4 percentage point subtraction from real GDP in the first quarter due to adverse winter weather, the annual GDP growth in 2014 is expected to be 2.8%, stronger than the 2.5% projected in December's survey. On an annual average basis, real GDP growth is forecast to increase from 1.9% last year to 2.8% this year, and to 3.1% in 2015.
* San Francisco Federal Reserve Bank President John Williams says the central bank hasn't "changed fundamentally" its views on when the first interest rate hike will come. "In the big picture, the policy hasn't changed," Williams said in an interview with the Washington Post published online Monday. "Any kind of standard way of thinking about monetary policy is, with unemployment lower, then down the road interest rates will normalize a little bit faster," he said. "We're talking again about 2016. There's no, to my mind, near-term change for monetary policy."
* New research from the San Francisco Federal Reserve Bank shows the interest rate risks to Federal Reserve still-expanding balance sheet are "manageable," with the likelihood of significant losses "very low." "Our analysis shows that the likelihood of significant losses on the Fed's Treasury portfolio or a long cessation of Treasury remittances is very low," concludes the research by the San Francisco Fed published in its Economic Letter Monday. "Analyzing a range of possible future interest rate scenarios - and their associated probabilities - shows that potential losses associated with these declines are very likely to be manageable," economists Jens Christensen, Jose Lopez and Glenn Rudebusch write.
* Congress returned from one of its two spring recesses to a raft of unresolved issues: a loan package to Ukraine, possibly coupled with a quota increase for the IMF and sanctions on Russia; Senate legislation to renew expired emergency unemployment insurance benefits; legislation to prevent a steep decrease in reimbursement rates for doctors participating in Medicare; and the fiscal year 2015 budget. It is unclear if any of the issues will get resolved, or even advanced, this week.
* While there is "no evidence of market manipulation" of daily indicative exchange rates posted by the Bank of Canada and which seem to be used as benchmarks for some financial transactions, the central bank is "considering any changes that may be appropriate," Bank of Canada Deputy Governor Timothy Lane said Monday. The BOC will examine how market participants are using those rates "to see how any possible changes could affect market functioning," he said in a prepared speech at the Osgoode Hall Law School and Schulich School of Business in Toronto, Ontario.
* Brazil's markets are near unanimous in expecting the Central Bank Monetary Policy Committee (Copom) willl raise the Selic policy rate another 25 basis points April 2, but traders are uncertain how long this tightening cycle, which began last April, will last. The decision comes as inflation expectations are on the rise. The latest private sector consensus forecast is for 6.11% inflation this year, higher than last year's 5.91% and the 4.5% target.
* Argentina this week will continue efforts to increase dollar supplies in the market, helping to reduce pressure on the exchange rate as inflation accelerates and teachers extend a protest to demand higher wages. The central bank last week ordered banks to declare their currency trading on futures markets in a bid to bring them in line with a limit imposed in February on their foreign currency holdings. Banks may only hold 30% of their total liquid assets in foreign currencies and only 10% in futures. Some banks allegedly skirted these requirements by selling dollar futures to subsidiaries such as brokers.
* Analysts will be keen to read Mexico's global economic activity indicator (IGAE) for January when state statistics agency INEGI releases the data Tuesday, to hopefully help dispel growing doubts over the long-expected economic recovery in Mexico. Estimates for the monthly GDP estimate are just above the 1% mark, largely based on the 2.5% year-to-year increase in the manufacturing sector, noted in the 0.7% rise in industrial production for January. Auto production in particular has seen strong growth, and the rise in construction activity, while still negative on an annual comparison, appears to have finally bottomed out, helped by a 20% increase in public spending for the first month of the year, much of which is going to government-backed housing projects
--MNI Washington Bureau; tel: +1 202-371-2121; email: dgulino@mni-news.com