Daily Market Update 16 May 2013 - Will the ‘anti-Australia’ trade continue?
US industrial production<http://www.federalreserve.gov/releases/g17/current/> fell by the most since August 2012 in April with a decline of -0.5% reported. The result was below the -0.2% fall expected by economists and well short of the downwardly-revised +0.3% gain of March. A sharp drop in utilities, down -3.7% after rising +6.4% in March, coupled with a -0.4% decline in manufacturing, the second-consecutive monthly contraction, were the chief catalysts behind the weak result.
US homebuilder confidence rebounded strongly in May with the NAHB index<http://www.nahb.org/news_details.aspx?sectionID=134&newsID=16307> rising to 44. While below the 50 level that separates optimism with pessimism, the result was higher than the 43 reading expected by economists and a sharp improvement on the downwardly-revised 41 figure of April.
Manufacturing activity across the New York State contracted unexpectedly in May with the Empire State Index<http://www.newyorkfed.org/survey/empire/empire2013/2013_05Report.pdf> coming at -1.43. The result was below the +3.05 figure of April and expectations for a rise to +4.00.
US producer price inflation fell heavily in April with a decline of -0.7% reported<http://www.bls.gov/news.release/ppi.nr0.htm>. The result was below the -0.6% reading expected by the markets with the year-on-year rate falling to +0.6%. Excluding volatile items, ‘core’ inflation inched up by 0.1%, a result that left the annualised increase at +1.7%.
The Eurozone economy remained deep in recession to start the year with Eurostat reporting<http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-15052013-AP/EN/2-15052013-AP-EN.PDF> a quarterly decline of -0.2%. The result was slightly below the -0.1% fall expected by the markets and left the annualised decrease at -1.0% Of the big three nations, Germany<https://www.destatis.de/EN/PressServices/Press/pr/2013/05/PE13_163_811.html>, France<http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20130515> and Italy<http://www.istat.it/en/archive/90098>, all came in below expectations for the quarter with figures of +0.1%, -0.2% and -0.5% reported. Perhaps of more concern, declines in annualised terms were steep, printing at -1.4%, -0.4% and -2.3% respectively.
UK unemployment<http://www.ons.gov.uk/ons/dcp30488_263579.xml> fell to 7.8% in March, lower than the 7.9% rate expected by the markets. Separately, annualised average earnings in the three months to March rose by just +0.8%, the lowest rate on record, while the number of jobless claimants fell unexpectedly, declining by 7,300 against expectations for a reading of -3,000.
The Bank of England (BoE) released their quarterly inflation report<http://www.bankofengland.co.uk/publications/Documents/inflationreport/2013/ir13may.pdf> overnight. In what may seem optimistic given their recent track record, they downgraded their inflation forecasts, expecting it to peak earlier and lower than what they saw in February, with GDP over the coming years to pick up faster than what had been previously thought. Despite the somewhat optimistic tone, they warned ‘the economic recovery remains weak and uneven’ with it ‘weak by historical standards.’
French CPI fell in April with a decline of -0.1% reported<http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20130515>. The figure was below the flat reading seen earlier in the month and left the annualised increase at a benign +0.8%.
The Day Ahead (All times AEST)
The ASX 200 looks set to rise in the early parts of trade with SPI futures pointing to a gain of 7 points on the open. While that merely reflects the frothy rally seen on Wall St, given sharp falls in commodities prices overnight, coupled with offshore selling in the wake of recent Australian Dollar weakness, you’d have to be somewhat sceptical as to whether the index will be able to hold its gains into the closing bell.
Showing just how out of favour it is, the Australian Dollar continued to languish near 11-month lows overnight with the currency barely reacting to what was a poor set of US economic data. This morning the currency finds itself at .9887, smack-bang in the middle of its .9854-.9919 overnight range, with more of the same expected today in light of little market-moving data. Key support kicks in at .9850 with resistance likely to emerge on any venture above.9915.
Regional data releases today include Q1 GDP and industrial output from Japan along with foreign direct investment from China.
A big economic calendar this evening with the release of initial jobless claims, building permits, housing starts, Philadelphia Fed manufacturing survey, CPI and real weekly earnings from the States, French non-farm payrolls and industrial investment, trade figures from the Eurozone and Italy along with the final read of Eurozone CPI. On the Fed front we’ll hear from Plosser, Rosengren, Fisher, Williams, Lacker and Raskin.