Daily Market Update 6 May 2013 - ASX 200 set for takeoff

Daily Market Update 6 May 2013 - ASX 200 set for takeoff

Somewhat-contradicting a raft of weaker data releases seen in recent weeks, the US labour market sprung back to life last month with the economy<http://www.bls.gov/news.release/pdf/empsit.pdf> adding an additional 165k jobs in April. The result was stronger than the 145k clip that had been expected by the markets and an improvement on the upwardly-revised 138k pace of March and was the highest level seen since February this year. With employment beating on the topside and participation holding steady at 63.3%, still the lowest level seen since 1979, overall unemployment declined, falling 0.1% to 7.5%, a 52-month low. Adding to the result, the BLS also revised up hiring for February and March by an additional 114k, leaving the average monthly increase over the past three months at a more-than-respectable 212k. While the headline data was great, as has so often been the case in recent years, the underlying data offered a more-balanced assessment of the labour market’s strength with the average workweek falling 0.2 hours to 34.4 while average hourly earnings rose by a miniscule 4c to $23.87. Throw in a surge in temp hiring of 31k, this time with no accompanying lift in hours worked, and it suggests that many of the jobs created were not of the same ‘quality’ as those forgone in the wake of the financial crisis.


US service-sector activity expanded a slightly slower-than-expected pace in April with the ISM’s<http://www.ism.ws/ISMReport/NonMfgROB.cfm?navItemNumber=12943> non-manufacturing PMI gauge falling to 53.1. The result was below the 54.4 figure of March and forecasts for a decline to 54.0 and was the lowest level seen since July 2012. While new orders continued to expand at a solid pace, coming in at 54.5 from 54.6 in March, a good sign for growth moving forward, it was interesting to note that the employment component fell 1.3pts to 52, an anomaly of sorts given the surge in service sector hiring seen in the corresponding NFP report.


US factory orders slumped in March with a decline of -4.0% reported<http://www.census.gov/manufacturing/m3/prel/pdf/s-i-o.pdf>. The result was below the -2.6% fall that had been forecast by economists with ‘core’ orders, those excluding lumpy transportation items, slipping by 2.0% after a downwardly-revised 0.7% decline in February. Adding to disappointing report, February’s initial 3.0% rise was revised down to an increase of 1.9%.


US durable goods orders for March were revised lower on Friday, showing a decline of -5.8% from the previous figure of -5.7%.


The UK economy continued to surprise on the upside on Friday with service-sector PMI<http://www.markiteconomics.com/Survey/PressRelease.mvc/ee04a553450142e999b7d7dd83ca9308> rising to 52.9 in April. The result was higher than the 52.4 figure that had been expected by the markets and was the highest level seen since August 2012.


Eurozone producer prices continued to decline in March with a fall of 0.2% reported<http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-03052013-AP/EN/4-03052013-AP-EN.PDF>. The result was in line with market expectations and left the year-on-year expansion at a benign +0.7%.


The Reserve Bank of India<http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=28594> cut interest rates in May, lowering their repo and reverse repo rates by 0.25% to 7.25% and 6.25% respectively.


The Day Ahead (All times AEST)


Japanese and UK markets are holidaying today.


5, 4, 3, 2, 1. That’s the countdown to the ASX 200’s lift off this morning with the index set to be shot into space on the back of material sector gains. SPI futures currently point to a gain of 56pts on the open, an increase that will likely be surpassed should we see fresh funds entering stocks rather than a rotation out of financials. While we have serious doubts whether the bounce in commodity prices can last, much of the increase was fuelled by short-covering in futures rather than on physical demand, with resource stocks beaten down and many still pricing in a rate cut from the RBA tomorrow, for today at least, it appears likely that the index will be able to hold its initial gains into the closing bell.

Mirroring the performance of stocks and commodities on Friday evening, the Aussie Dollar has opened higher this morning with the currency currently fetching USD1.031. Given the proximity to the RBA policy meeting tomorrow, we expect the March retail sales figure to be highly influential today with the print likely to dictate the short-term direction for the currency. Support is found at 1.0303, 1.0282 and 1.0258 with selling pressure kicking in at 1.0322, 1.0346 and again at 1.0385.


A big domestic data dump today with retail sales, ANZ job ads and the TD-MI inflation gauge all scheduled for release. Given its importance to GDP growth, most attention will fall on the retail sales figure with economists expecting an increase of 0.2% after surging 1.3% in February. The TD gauge hits the screens at 10.30am with retail sales and job ads released soon after at 11.30am.


Regional data releases today include services PMI gauges from China and India along with Taiwanese CPI.


The services sector continues to dominate the economic calendar this evening with PMI readings from Europe and Canada scheduled for release. Aside from those we’ll also receive the Sentix survey and retail sales from the Eurozone along with Canadian building permits.



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