Global

· Emerging Markets Must Prepare for U.S. Rate Hike - IMF's Lagarde. Emerging markets must prepare for the impact of a rise in U.S. interest rates which could surprise in both its timing and pace, the head of the International Monetary Fund said in India on Tuesday. In a speech in Mumbai, Managing Director Christine Lagarde warned the so-called "taper tantrum" that slammed emerging markets in 2013 could be repeated. "The danger is that vulnerabilities that build up during a period of very accommodative monetary policy can unwind suddenly when such policy is reversed, creating substantial market volatility," Lagarde said in prepared remarks. "We already got a taste of it during the taper tantrum ... I am afraid this may not be a one-off episode." Lagarde said advanced economies could help reduce the risk of market volatility by communicating policy intentions clearly. But she added that emerging markets that had tackled economic vulnerabilities had fared better when shockwaves hit in 2013. (Reuters)

Asia

· BOJ Chief Downplays Deflation Risk, Sticks to Inflation Target. Bank of Japan Governor Haruhiko Kuroda said lower energy costs may push consumer prices into negative territory but it won't derail a pick-up in inflation as the economy recovers, signalling that he sees no immediate need to expand stimulus. Nearly two years into his tenure, Kuroda continues to wrestle with weak prices that have kept alive expectations the central bank will ease again this year to reach its 2% inflation target. The BOJ maintained its massive stimulus programme on Tuesday but offered a slightly more downbeat view on prices, saying inflation will hover around zero for the time being. "Depending on oil price moves, we can't rule out the possibility that core consumer prices will fall slightly year-on-year," Kuroda told a news conference. But he said prospects of improving wages and economic growth will underpin inflation expectations (Reuters)

· Singapore February Exports Hit by China Slowdown. Singapore's exports in February fell more than expected as momentum in the global economy remained modest and as a slowdown in China took a heavy toll, adding to expectations that the central bank may ease monetary policy next month. Non-oil domestic exports (NODX) slid 9.7% in February from a year earlier, trade agency International Enterprise Singapore said on Tuesday in a statement. That compared with a 0.4% contraction forecast, and 4.3% growth in January. The disappointing performance in February was partially due to the Lunar New Year holidays, which fell in January in 2014. On a month-on-month seasonally adjusted basis, NODX declined 9.4% in February, again missing a forecast of 0.7% slide. (Reuters)

· Indonesia’s Central Bank Holds Benchmark Rate at 7.5%. Indonesia's central bank, which last month surprisingly cut its benchmark rate, on Tuesday held it steady at 7.50%, as expected. Bank Indonesia said the level of the rate is consistent with efforts to contain inflation and the current account deficit. At the meeting, it also maintained its overnight deposit facility rate and lending facility rate, at 5.50% and 8.00% respectively. Most analysts predicted Bank Indonesia would hold the rate on Tuesday, but would probably cut sometime later in the year. (Reuters)

· China February FDI Up 0.9% in February, Outbound Flows Leap 68%. Foreign direct investment (FDI) in China grew 0.9% year-on-year in February, slowing sharply from January's surge, but analysts caution that seasonality may explain the swings even as a weakening economy continues to dent investor confidence. The investment figures add to mostly weak February data, which has raised expectations of further policy steps from Beijing to spur growth. For January and February combined, inbound FDI rose 17.0% from a year earlier, to $22.5b, the Commerce Ministry said on Tuesday. Exceptionally strong rises in FDI inflows in the first two months of the year, including a nearly 874% jump for Saudi Arabia and a 367% gain for France, were due to one-off deals, commerce ministry spokesman Shen Danyang said. The weak performance underscored a cooling economy which is spurring more Chinese firms to plough money into assets overseas in a trend that is soon set to overtake inbound investment. Indeed, China's non-financial outbound direct investment surged 68% in February from a year ago, the ministry said. Outbound investment for January and February combined rose 51% to $17.4b.

USA · Bad Weather Wallops U.S. Housing Starts, Setback Likely Temporary. U.S. housing starts plunged to their lowest level in a year in February likely as harsh weather kept building crews at home, in the latest indication that the economy hit a soft patch in the first quarter. Groundbreaking tumbled 17% to a seasonally adjusted annual pace of 897,000 units, the lowest level since January 2014, the Commerce Department said on Tuesday. Upward revisions to January's starts and a 3% increase in building permits last month suggested that February's decline was likely a temporary setback for housing. Permits have been above a 1 million-unit pace since July. Economists had forecast groundbreaking at a 1.05 million-unit pace in February. Snowy and cold weather conditions gripped much of the country in the second half of February. (Reuters)

Europe

· German Investor Morale at Brightest in Just Over a Year. The mood among German analysts and investors improved in March for a fifth consecutive month, hitting its highest level since February 2014, but ZEW warned a lack of progress in the Greek and Ukraine crises was dampening sentiment. Mannheim-based think tank ZEW said on Tuesday its monthly survey of economic sentiment increased to 54.8 in March from 53.0 in February. That undercut the consensus forecast for a reading of 58.2. "Spring fever. The German ZEW just sent more signs of increasing optimism in the euro zone's largest economy," said Carsten Brzeski, senior economist at ING. (Reuters)

· French 2014 Welfare Deficit Drops to 9.7b Euros. the deficit of France's welfare system fell to 9.7b euros ($10.28b) in 2014, 2b euros less than expected and down from 12.5b euros in 2013, the Finance Ministry said on Tuesday. France's Socialist government is struggling to bring its public deficit down to 3% of gross domestic product by 2017, having been granted three extensions on the original deadline by the European Union's executive arm. The welfare system's deficit makes up about 11% of France's overall public deficit. The Finance Ministry, confirming data first published in business daily Les Echos, said in a statement that the healthcare system's deficit had reached 6.5b euros versus 7.3b euros forecast in December. The retirement system's deficit reached 1.2b euros versus 1.6b, it said. (Reuters)

· ECB's Balance Sheet Expands As It Begins Stimulus Program. The balance sheet of the European Central Bank and the euro zone's national central banks expanded by 7.298b euros ($7.76b) to 2.142 trillion euros in the week to March 13, the ECB said on Tuesday. The increase came as the ECB began buying sovereign bonds under an asset purchase plan that aims to pump 1 trillion euros into the euro zone economy with a view to lifting inflation from below zero back up toward its target of just under 2%. The ECB's gold reserves fell by 27 million euros to 343.8b euros. (Reuters)

· Eurozone February Consumer Price Fall Confirmed, But Core Inflation Up. A sharp fall in the price of fuel and heating oil pulled down consumer prices in the euro zone as expected in February but core inflation, which excludes the volatile energy component, edged higher, Eurostat data showed on Tuesday. Eurostat said consumer prices in the 19 countries sharing the euro rose 0.6% month-on-month for a 0.3% year-on-year fall, less sharp that a 0.6% year-on-year decline in January. The data confirms an earlier Eurostat estimate and is in line with economists forecasts. Energy prices rose 1.6% on the month, but fell 7.9% year-on-year in February. Cheaper fuels for transport subtracted 0.64%age points from the overall end result and less expensive heating oil took off another 0.19 points. (Reuters)

Currencies

· Dollar Bulls Bank on Fed Losing its Patience. The dollar stood steady in Asia on Wednesday just hours before the Federal Reserve was expected to take a major step toward lifting interest rates for the first time in almost nine years. A Fed statement is due at 1800 GMT, followed half an hour later by a press conference with Chair Janet Yellen. The central bank will also release members' forecasts for inflation and interest rates, and some analysts suspect the trajectory of future increases could be lowered. Against a basket of currencies the dollar was a fraction firmer on Wednesday at 99.627, and within spitting distance of its recent 12-year peak of 100.390.The euro laboured at $1.0591, having failed to sustain a modest bounce to $1.0651 overnight. Support was seen at $1.0551 ahead of the 12-year trough of $1.0457.The dollar was also steady at 121.34 yen, mid-way between support at 120.67 and resistance at 122.02.Sterling was under pressure at $1.4748 ahead of busy session that includes UK jobs data, minutes of the Bank of England's last policy meeting and a budget from the Conservative government. The Australian and New Zealand dollars were affected by weak commodity prices, which were partly a function of the U.S. dollar's strength. (Reuters)

Commodities

· Brent Falls Below $54 to Reverse Earlier Gains as Glut Worries Drag. Brent crude fell below $54 a barrel in choppy trade on Tuesday, reversing gains earlier in the day as concerns over a growing supply glut weighed on the market. Prices on the other side of the Atlantic fell for a sixth session to just above a six-year low, keeping their discount to Brent at near $10, a trend that analysts say could deepen. Brent, which rose to a session high of $54.38, was trading at $53.59, down 35 cents. U.S. crude, or West Texas Intermediate (WTI), was at $43.41 a barrel, down 47 cents and slightly above 6-year lows of $42.85 marked on Monday. (Reuters) · Gold Hits 4-Month Low Ahead of Fed Meeting. Gold fell to a four-month low in volatile dealings on Tuesday, on investor jitters ahead of a Federal Reserve policy meeting that may offer further clues to support expectations of a mid-2015 rise in U.S. interest rates. Spot gold fell as low as $1,142.86 an ounce in earlier trade, its lowest since Nov. 7, and was down 0.6% at $1,147.06 by 1834 GMT. Spot platinum tumbled to a near six-year low at $1,084.50 per ounce as weaker gold prices and improving supply took a toll on prices. Prices recovered and were down 1.2% at $1,091.74 an ounce, while its discount to gold expanded to around $55 an ounce, the widest since March 2013. Silver was down 0.6% at $15.52 an ounce, while palladium fell 2.2% to $760.50 an ounce. (Reuters)