Daily Market Update 24 April 2013 - An Apple a day keeps the bears at bay
Rounding off a disappointing day for global factory data, US manufacturing activity expanded at a slower-than-expected pace during April with Markit’s flash PMI gauge<http://www.markiteconomics.com/Survey/PressRelease.mvc/e08fc968b6dd4284a5aff957895456ca> sliding to 52.0. The result was well below the 54.6 reading of March and expectations for a decrease to 54.0.
Complementing robust housing starts data released last week, US new home sales surged in March with the Commerce Department reporting<http://content.govdelivery.com/attachments/USESAEI/2013/04/23/file_attachments/206227/New%2BResidential%2BSales%2B%2528March%2B2013%2529.pdf> an increase of 1.5%. The result was far stronger than the downwardly-revised 7.6% plunge of February with the 416,000 annualised pace the highest recorded since August 2008.
US house prices continued to push higher in February with the FHFA index<http://www.fhfa.gov/webfiles/25124/Feb2013MonthlyHPI.pdf> rising by a further 0.7%. The result was above the 0.6% rise seen in January and left the year-on-year increase at 7.1%.
Manufacturing activity across the Richmond region fell unexpectedly in April with the regional Fed index<http://www.richmondfed.org/research/regional_economy/surveys_of_business_conditions/manufacturing/2013/pdf/mfg_04_23_13.pdf> coming in at -9. The result was well below the +8 figure previously seen in March with large declines in shipments, new orders and backlogs behind the worse than expected result.
Canadian retail sales rose strongly during February with Statistics Canada reporting<http://www.statcan.gc.ca/daily-quotidien/130423/dq130423a-eng.pdf> an increase of 0.8%. The result was near-triple the 0.3% rise that had been forecast by economists and came on the back of an equally-impressive 0.9% gain in January. “Core” sales, those excluding lumpy auto sales, came in slightly below forecasts, rising 0.5% against expectations for an increase of 0.7%.
Eurozone manufacturing activity shrunk at a faster-than-expected pace in April with Markit’s ‘flash’ PMI gauge<http://www.markiteconomics.com/Survey/PressRelease.mvc/1d2fe9c5f343429e9ba5f5c89163a14e> dropping to 46.5. The result missed forecasts for a static reading of 46.8 with activity in Europe’s two largest economies, Germany<http://www.markiteconomics.com/Survey/PressRelease.mvc/385fc53b0cb142d397a8d44384b49fec> and France<http://www.markiteconomics.com/Survey/PressRelease.mvc/255f2b0aa03d42719aa30690d0f80151>, sitting firmly in contractionary territory. While still weak, the news was a little better on the services front with the gauge rising to 46.6, in line with economic forecasts, thanks to 2.8pts jump in France (44.1).
Italian consumer confidence ticked higher in April with Istat reporting<http://www.istat.it/en/archive/88670> an increase to 86.3. The result was above the 85.3 figure of March and expectations for a decline to 85.1.
UK factory orders fell to the lowest seen since October 2010 during April with the CBI index<http://www.cbi.org.uk/media-centre/press-releases/2013/04/maufacturing-orders-disappoint-but-output-increases/> plummeting to -25. The reading was well below both the -15 reading of March and expectations for a rise to -14.
The contraction in Taiwanese industrial output slowed in March, thanks in part to the timing of the Lunar New Year, with the government reporting a decrease of 3.28%. While still weak, the result was an improvement on the 11.45% decline in February.
As expected, the Reserve Bank of New Zealand held their overnight cash rate<http://www.rbnz.govt.nz/news/2013/5236174.html> steady at 2.50% this morning.
The Day Ahead (All times AEST)
The ASX 200 looks set to go on an Apple-inspired surge this morning with SPI futures pointing to a gain of 50pts on the open. While Apple’s earnings have about as much relevance to our market as the performance of Chinese manufacturing activity on the Nasdaq, given the price action witnessed overnight and seemingly endless chase for yield seen in recent times, it wouldn’t surprise to see our market hold these gains, at least in the early parts of trade. While fundamentals suggest we’ll see some profit-taking later in the session, base and precious metals were off again in overnight trade in response to weak manufacturing data released yesterday, should CPI print below expectations, something that’ll spur rate cut hopes, and Chinese equities bounce after their swoon yesterday, there is a very real chance that we’ll see a classic low-volume ‘meltup’ in the latter parts of trade.
Having plumbed a low of 1.0221 yesterday following the weak China PMI print, the Aussie Dollar has once again found its footing overnight with the currency surging to a high 1.0270 on the back of equity market gains. While that was largely a speculative move based on Apple’s earning report this morning, all attention today will revert to the Q1 CPI report released at 11.30am with the ‘core’ reading, the preferred gauge of the RBA when it comes to setting policy, likely to dictate the currencies moves today. Should we get a reading below market expectations, expect the Aussie to retest the lows struck yesterday. On the flipside, should we get a hot print, it’ll be akin to waving a red rag at a bull with the currency likely to surge above the 103c level on the back of lowered rate cut expectations.
Australian Q1 CPI will be released at 11.30am this morning. Markets expect headline inflation to have risen 0.7% over the quarter, a result that’d leave the annual rate at 2.8%, with the RBA-relevant core rising 0.5% and 2.3% respectively. As was the case with the New Zealand reading last week, expect there to be a distinctive split with falls in tradable inflation likely to partly offset another ugly increase in non-tradable prices. While there are obvious risks in both directions, given the Aussie is largely unchanged from Q3 2012, unlike the NZD which increased modestly over the same period, if there are any risks heading into this release, they are moderately on the upside.
A quiet-yet-highly-influential data calendar arrives this evening with the release of US durable goods orders, German business confidence along with retail turnover figures from Italy and the UK. On the policy front Bank of Canada Governor Mark Carney will speak while Italy auctions off benchmark 10-yr debt.
Boeing, Ford, Nasdaq, Proctor & Gamble, Sprint Nextel and Zynga report Q1 earnings this evening.