Daily Market Update 8 May 2013 - Germany wows, now can China?
US consumer credit logged its smallest rise since July 2012 in March with the Federal Reserve reporting<http://www.federalreserve.gov/releases/g19/current/g19.pdf> an increase of $7.97b. The result was below the $18.63b figure of February and expectations for a decline to $16b with revolving credit, namely credit cards, the chief catalyst for the result with a fall of $453m recorded. As has been the case for much of the past two years, non-revolving credit such as student and auto loans continued to surge, rising by an additional $9.68b.
German industrial orders surged in March with government reporting an increase of +2.2%. The result made a mockery of forecasts for a decline of -0.5% and came on the back of an equally-impressive +2.2% gain in February. Breaking down the release, most demand was external (+2.7%) with orders from within the Eurozone rising by a robust 4.2%. Big increases for intermediate and capital goods, up +3.6% and +2.0% respectively, did the all of the heavy lifting with orders for durable, consumer-related goods falling -0.7% after coming in flat for February.
Giving back February’s increase and then some, French industrial output fell heavily in March with INSEE reporting<http://www.insee.fr/en/themes/info-rapide.asp?id=10&date=20130507> a decline of -0.9%. The result was three-times worse than the 0.3% drop expected by the markets and completely overrode the upwardly-revised +0.8% gain of February. Mirroring the headline figure, the internals were just as unimpressive with all bar one category falling with manufacturing output slipping by -1.0%.
The French trade deficit narrowed in March with a decline to €4.696b reported. The figure was an improvement on the €5.6b deficit expected by the markets with export growth increasing at the same time imports fell.
In what may well be a prelude to China’s trade numbers later today, Taiwanese trade data missed forecasts overnight with exports and imports falling by 1.9% and 8.2% in the year to April. With seasonality from the Lunar New Year now out of the picture, it suggests that expectations for Chinese import and export growth of 13.9% and 10.3% may be overstated.
The Day Ahead (All times AEST)
The ASX 200 looks set to reclaim all of the losses witnessed yesterday with SPI futures pointing to a rise of 24pts on the open. While the index will start off strong, China’s trade data released around midday local time will largely determine how we finish off the session with a ‘beat’ likely to prompt renewed buying in resources stocks on ‘the global recovery’ story. On the flip side, should the data miss, something we feel is the more likely scenario looking at Taiwan’s numbers last night, it will likely see the index trim its gains into the closing bell. As opposed to recent days, we expect financials to remain firm throughout the day with most of the action likely to revolve around ANZ (last day trading cum-dividend) and NAB (reports H1 earnings tomorrow) shares.
The Aussie Dollar has remained under pressure following the RBA rate cut yesterday with the currency continuing to trade below the 102c level despite continued gains in equity markets overnight. Like with the ASX 200, the China trade data, along with the subsequent reaction in Chinese equities, will determine the pathway for the currency today with a ‘beat’ likely to send the currency back towards the 1.0230 level while a ‘miss’ will see it test the yearly low of 1.0113 struck on March 4.
Chinese trade data for April will be released around Midday AET. Economists expect another ‘goldilocks’-type scenario with import and export growth expected to surge 13.9% and 10.3% on year.
A quiet economic calendar this evening with German industrial output, Swiss CPI and Canadian housing starts the only releases of note.