Daily Market Update 17 May 2013 - Anomaly or true state of the US recovery?

Daily Market Update 17 May 2013 - Anomaly or true state of the US recovery?

US initial jobless claims surged last week with the Labour Department reporting<http://www.dol.gov/opa/media/press/eta/ui/current.htm> an increase of 32k to 360k. The result was above the 330k pace that had been expected by the markets and was the highest level seen since late March this year.


Mixed US housing data for April was released<http://www.census.gov/construction/nrc/pdf/newresconst.pdf> overnight with building permits surging to the highest annual pace since January 2008 while housing starts plunged to lows not seen since November last year. Permits increased by +14.3% to 1.017m, a result that was well ahead of the downwardly-revised -6.5% decline of March. While that was good, the news on housing starts was not with the annual rate falling by -16.5% to 853k. The result missed forecasts for a decline to 973k and completely dwarfed the +5.4% increase of March.


US inflationary pressures continued to ease in April with a decline of -0.4% reported<http://www.bls.gov/news.release/pdf/cpi.pdf>. The result was double the -0.2% fall that had been forecast by economists and left the annual increase at 1.1%. Excluding volatile items such as food and fuel, ‘core’ CPI ticked up by +0.1%, half the rate expected, with the annual increase falling to +1.7% from +1.9% in March. While CPI moderated at the same time wages grew, it wasn’t enough to see real weekly earnings<http://www.bls.gov/news.release/pdf/realer.pdf> advance due a decline in hours worked.


Manufacturing activity across the Philadelphia region fell unexpectedly in May with the regional Fed index<http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2013/bos0513.cfm> sliding to -5.2. The result missed expectations for an increase to +2.4 and was below the +1.3 reading previously seen in April. Big declines in the new orders and employment subindices, printing at -7.9 and -8.7 respectively, were largely to blame for the worryingly-weak performance.


The Eurozone trade surplus rose to the highest level on record in April with a figure of €22.9b reported<http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/6-16052013-BP/EN/6-16052013-BP-EN.PDF>. The result more than doubled the €10.1b surplus previously seen in March with a 10% annual decline in exports, coupled with steady imports, leading to huge trade differential.


Eurozone inflation<http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-16052013-AP/EN/2-16052013-AP-EN.PDF> continued to decline in April with the final reading coming in at +1.2%. The result was in line with the flash estimate released earlier in the month and marked the slowest annual growth since February 2010.


French non-farm payrolls continued to decline in Q1 with a fall of 20,300, or -0.1%, reported<http://www.insee.fr/en/themes/info-rapide.asp?id=18&date=20130516>. While disappointing, the result was an improvement on the -44,600 (-0.3%) decline recorded in the three months to December. In a separate report, investment across the manufacturing<http://www.insee.fr/en/themes/info-rapide.asp?id=15&date=20130516> sector is expected to fall -4% in 2013, a downward revision to the flat reading expected in January.


The Day Ahead (All times AEST)


The ASX 200 looks set for a flat start today with SPI futures pointing to a rise of 3pts on the open. While there’s a chance we’ll follow the well-trodden path of opening bid before sliding into the close, something we’ve seen occur over the last two trading sessions, given our market has already grossly underperformed this week and the fact US Fed Chairman Ben Bernanke speaks this weekend, it wouldn’t surprise to our market squeeze higher into the closing bell.


The AUDUSD has remained under intense pressure overnight despite more weak US economic data with the currency slipping below USD98c for the first time since June 6 last year. While the price action witnessed over the past week has been nothing short of bearish, with markets short-term short and Bernanke addressing the markets this weekend, we expect the Aussie to squeeze higher over the course of today’s trading session. Support is found between .9790-.9800 with resistance kicking in above .9850 and again at .9880.


A quiet regional calendar today with New Zealand producer prices, Japanese machine orders and the leading index in China the only releases of note.


Data releases this evening include the Uni of Michigan consumer survey and leading index from the States along with CPI and wholesale trade figures from Canada. On the fed front, Minneapolis President Narayana Kocherlakota speaks in Chicago.


Federal Reserve Chairman Ben Bernanke speaks over the weekend. Given the topic of his speech, ‘Economic prospects for the long run’, expect it to be market-moving once Asian trade begins on Monday.


With the author heading away for a much-needed break, the report will be placed on hiatus, resuming again in late June. Thanks again for your support and continued readership.


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