Daily Market Update 30 April 2013 - Risk rallies on fresh stimulus hopes
US personal consumption inched higher in March with an increase of 0.2% reported<http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm>. The figure was higher than the flat reading expected by economists but below the 0.7% rate of February. Matching the increase seen there, incomes also rose by 0.2%, a disappointing result given markets were expecting an increase of 0.4%. However, with consumption increasing at the same time inflation fell, ‘real’ consumption rose by 0.3%, the same figure reported in February.
Core PCE price inflation<http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm>, the preferred measurement of price pressures used by the US Federal Reserve, came in flat over the month of March. The reading was below the 0.1% increase expected and left the annualised rate at a benign 1.1%.
US pending homes sales rebounded strongly during March with an increase of 1.5% reported<http://www.realtor.org/news-releases/2013/04/march-pending-home-sales-improve-but-overall-pace-leveling>. The result was higher than the 1% rise expected and a sharp improvement on the 0.4% decline reported previously.
The Chicago Fed Midwest manufacturing index<http://www.chicagofed.org/webpages/research/data/cfmmi/current_data.cfm> moved higher in March, rising 0.3% to 96.5.
Eurozone economic sentiment slipped during April with the EC reporting<http://ec.europa.eu/economy_finance/db_indicators/surveys/documents/2013/esi_2013_04_en.pdf> a decline to 88.6. The result was lower than both the 90.1 reading of March and expectations for a decline to 89.3 and was the lowest level seen since December 2012. Elsewhere the news was better, well sort of, with consumer sentiment rising to -22.3, above the -23.5 figure reported previously.
German inflationary<https://www.destatis.de/EN/PressServices/Press/pr/2013/04/PE13_149_611.html;jsessionid=810B53069CF7A5005B9C13616F3B3B23.cae3> pressures continued to decline in April with an annualised rise of 1.1% reported. The figure was miles below the 1.8% pace of March and expectations for a decrease to 1.7% and all but assures a rate cut from the ECB on Thursday.
Italian wage inflation<http://www.istat.it/en/archive/88909> held steady in the year to March with a rise of 1.4% reported. Elsewhere business confidence<http://www.istat.it/en/archive/88930> slipped in April, falling to 87.6 from the downwardly-revised 88.6 reading of March.
More troubling Spanish data was released overnight with retail sales<http://www.ine.es/en/daco/daco42/daco4215/ccm0313_en.pdf> and consumer price inflation<http://www.ine.es/en/daco/daco42/daco4218/ipce0413_en.pdf> falling heavily in recent months. Having logged an already-ugly -7.7% contraction in February, retail sales continued to slide in March, falling 8.9% from a year earlier. The news was little better on the inflation front with HICP rising by 1.5% in the year to April, a result below both the 2.6% pace of March and expectations for decline to 2.1%.
The Day Ahead (All times AEST)
Chinese markets remain closed today.
The ASX 200 looks set to threaten the March 12 High of 5163.5 today with SPI futures pointing to a rise of 21pts open. With higher commodity prices likely to trigger a short-squeeze amongst beaten-down materials names, the H1 profit announcement from ANZ, something that will ultimately determine whether recent gains amongst banking stocks are justified, will likely determine how we close today’s trading session. In all likelihood, the composition of the profit figure, whether largely due to cost-cutting or increased revenue growth, will either be the catalyst for renewed buying in the sector or the excuse to take profit after hefty gains seen since Q4 2012.
Boosted by hopes for fresh stimulus from the FOMC and ECB later in the week, the Australian Dollar moved higher overnight with the currency touching a high of 1.0358 on the back of renewed USD weakness. Today we expect the currency to continue its grind higher as traders continue to bet on a now-familiar pre-FOMC risk rally. With the overnight high likely to be overrun during the course of the Asian session, a move back to resistance between 1.0395-1.04 looks clearly on the cards. While there may be an exploratory test of downside support early in the session, something that would be understandable given its near-1c move, any dip will likely be contained above the 1.0330 level.
Australian private sector credit will be released at 11.30am this morning. With retail sales and consumer confidence seemingly on the improve, it’ll be interesting to see whether there is a flow-through effect in today’s credit numbers.
Abenomics will be the centre of attention in Asia today with the release of household spending, retail trade, unemployment, industrial production, manufacturing PMI, housing starts and construction orders in Japan. Elsewhere we’ll get building permits and business confidence in New Zealand, industrial output and manufacturing BSI in South Korea along with Taiwan Q1 GDP.
The busy data calendar continues this evening with release of Chicago manufacturing PMI, consumer confidence and the CaseShiller house price survey in the States along with Canadian GDP. Earlier in the session we’ll get unemployment figures from Italy, Germany and the Eurozone, CPI from Italy and the Eurozone, consumer confidence and retail sales figures from Germany, consumer spending and producer prices from France along with UK lending statistics from the BoE.
Office Depot, Pfizer, NYSE Euronext headline the US earnings calendar this evening.