Daily Market Update 28 June 2013 - 2012/13 set to end firmly in the black

US initial jobless claims<http://www.dol.gov/opa/media/press/eta/ui/current.htm> fell last week with a decline of 9k reported. The 346k clip was in line with economic forecasts with the less-volatile 4-week rolling average sliding to 345.75k.


Core PCE<http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm>, the preferred measure of inflation from the US Federal Reserve, inched higher in May with an increase of +0.1% recorded. The figure was in line with market expectations and left the year-on-year advance unchanged at just +1.1%.


US pending home sales<http://www.realtor.org/news-releases/2013/06/may-pending-home-sales-reach-highest-level-in-over-six-years> surged in May, rising +6.7% to 112.3. The result was well ahead of estimates for an increase of +1.0% and was the highest level seen since December 2006.


US personal consumption<http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm> rose modestly in May with an increase of +0.3% reported. The result was in line with economic forecasts and an improvement on the revised     -0.3% contraction of April. After adjusting for inflation, ‘real’ consumption increased by +0.2%, well ahead of the -0.1% decline seen in April. Partly explaining that result, personal incomes also outperformed with an increase of +0.5% recorded. The figure more than doubled the +0.2% rise expected by economists and was far stronger than the upwardly revised +0.1% increase of April.


Manufacturing activity across the US Midwest continued to contact in May with the Chicago Fed index<http://www.chicagofed.org/webpages/research/data/cfmmi/current_data.cfm> sliding to 95.8. The result was below the 96.2 reading previously seen in April and was the second-consecutive month that activity had declined.


Eurozone economic sentiment continued to improve in June with the EC index<http://ec.europa.eu/economy_finance/db_indicators/surveys/> rising to 91.3. The result was higher than the 90.3 reading that had been expected by the markets and an improvement on the 89.5 figure previously recorded in May. Of the survey subsectors improvements in industrial and consumer sentiment, up to -11.2 and -18.8 respectively, were enough to offset a decline in services which fell -0.3pts to -9.5.


Eurozone private sector lending<http://www.ecb.int/press/pdf/md/md1305.pdf> continued to contract in the year to May with the ECB reporting a decline of -1.1%. The result was below expectations for a decrease of -0.9% with April’s figure left unadjusted at -0.9%.


German unemployment<https://www.destatis.de/EN/PressServices/Press/pr/2013/06/PE13_215_132.html;jsessionid=8C5CA1E5A50731A2CF6874D376B05537.cae3> held steady in June with a rate of 6.8% reported. The figure bettered expectations for an increase to 6.9% with the number of persons out of work falling by 12k to 2.943m during the month.


Deflationary pressures continued to hit German import<https://www.destatis.de/EN/PressServices/Press/pr/2013/06/PE13_214_614.html;jsessionid=8C5CA1E5A50731A2CF6874D376B05537.cae3> prices in May with a decline of -0.4% reported. The result was double the -0.2% fall that had been expected by the markets and left the annualised decrease at -2.9%.


Failing to match improved readings on either side of the Atlantic, French consumer confidence<http://www.insee.fr/en/themes/info-rapide.asp?id=20&date=20130627> fell unexpectedly in May with INSEE reporting a decline to 78. The result was below both the 79 reading of May and expectations for an increase to 81.


Spanish retail sales<http://www.ine.es/en/daco/daco42/daco4215/ccm0513_en.pdf> decreased -4.6% in the year to May, a slight improvement on the downwardly revised -4.8% pace of April. Elsewhere CPI<http://www.ine.es/en/daco/daco42/daco4218/ipce0613_en.pdf> rose +0.4% in May leaving the annualised increase at 2.1%.


As reported in earlier estimates, the UK economy<http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q1-2013/index.html> grew by +0.3% during the March quarter. While unchanged, downward revisions to previous quarters data saw the annual rate halve to +0.3% from +0.6%.


The Day Ahead (All times AEST)


The ASX 200 looks set to end the 2012/13 financial year firmly in the black with SPI futures pointing to a gain of 26pts on the open. While flows will be irregular due to pre-tax positioning, those sectors that performed best during the past 12 months, financials, telecoms and healthcare, will likely do most of the heavy lifting. While gold miners will be under pressure after the spot price tanked overnight, a +1.32% rise in the iron ore price should also help the big miners. Given much of the recent focus has been on China, should the Shanghai Composite push into the black, something it has only done twice in the past 18 sessions, it will likely make the difference between today being either a good or great session.


A quiet session for the Australian Dollar overnight with the AUDUSD gently oscillating between .9260 and .9330 over the course of trade. While the currency could break in either direction from here, given current positioning and the price action witnessed in recent days, it is looking increasingly likely that the currency will have to push higher in the short term if the overall down move is to be sustained. Good buying is expected to emerge between .9220-40 with a sustained break above .9330 likely to see a test of resistance below the 94c level.


Australian private sector credit data for May will be released at 11.30am.


Abenomics will be back in focus this morning, albeit temporarily, with the release of manufacturing PMI, industrial production, retail sales, household spending, housing starts, unemployment and CPI in Japan. Elsewhere we’ll also receive Korean industrial and service sector activity along with New Zealand building consents.


A busy economic calendar this evening with the release of Chicago PMI and University of Michigan consumer sentiment survey (final) in the States, GDP and producer prices from Canada, retail sales and CPI in Germany, business confidence and CPI in Italy, French consumer spending, Greek retail sales and the Nationwide house price survey from the UK. On the Fed front we’ll hear from FOMC members Lacker and Williams.


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