Daily Market Update 10 July 2013 - The 'no news is good news' rally rolls on





Daily Market Update 10 July 2013 - The 'no news is good news' rally rolls on

The IMF downgraded their 2013 and 2014 global growth forecasts overnight with 0.2% shaved off both estimates to 3.1% and 3.8% respectively. In what will surprise few, the group forecast Chinese economic growth of 7.8% for the current year and 7.7% for 2014, reductions of 0.3% and 0.6% from their forecasts released in April. To read the report in full, please click here.

UK industrial output missed to the downside in May with flat growth recorded over the month. The result was below market expectations for an increase of 0.2% with downward revisions to prior data seeing the year-on-year rate fall to -2.7%. Adding to the headline miss, the internals of the report were largely unimpressive with all of the growth coming from mining and utilities with manufacturing output, expected to grow 0.3%, contracting by 0.8%.

The UK traded goods deficit rose slightly in May with a figure of £8.491b reported. The result was above expectations for an increase to £8.47b with a sharp turnaround in imports, up 1.3% from -3.8% in April, offsetting a smaller net rise in exports (+1.5% from -1.4% previously). Including services, the deficit also widened, rising to £2.4b from £2.1b in April.

UK economic growth expanded strongly in the second quarter, at least according to the NIERSR, with an expansion of 0.6% reported. While the pace was double the 0.3% pace they saw in Q1, in what makes for a sobering statistic, the group forecasts the UK economy won’t return to its pre-GFC size until the year 2015.

Canadian housing starts fell modestly in the year to June with growth of 199.6k reported. The figure was below the 204.6k pace recorded in the year to May but above economic forecasts for a decline to 187k.

Swiss retail sales grew 1.8% in the year to May, a result that was below the 3.1% clip previously reported in April.

The Day Ahead (All times AEST)

The ASX 200 looks set to build on yesterday’s gains this morning with SPI futures pointing to a rise of 17pts on the open. While we will open firmer on the back of near non-existent volumes, the Chinese trade and lending data due out around Midday, along with the subsequent reaction in Chinese equity markets, should set the tone for the latter parts of the session. Should both sets of data beat, something that is a distinct possibility given lowered market expectations, expect a broad-based rally to unfold on the back of a better domestic growth outlook. On the contrary, should the data miss, expect losses to eventuate lead by the materials sector.

A volatility-packed session awaits the AUDUSD today with the Chinese data and Fed speak set dictate terms over the next 24 hours. With the pair currently buying .9175, a far more neutral position after the short squeeze to begin the week, we expect the Chinese data to be most-influential over the course of the Asian session. Should we get a good outcome expect traders to target stops above the .9200 level with an eventual move back towards .9253 likely to ensue. On the flipside, should the data miss expectations, expect the pair to slip back to buying support located below the .9220 level.

The Westpac-MI consumer sentiment reading for July will be released this morning at 10.30am. On the policy front we’ll hear from RBA Assistant Governor Guy Debelle who’ll speak in Sydney from 5.40pm.

A busy regional calendar arrives today with Chinese trade and lending data for June the undisputed headline acts. Given the outperformance of Taiwan’s trade data on Monday, markets expect an improved performance from the world’s second-largest economy with exports forecast to rise 4%, imports by 8%, while the trade surplus is expected to swell to $27b. Alongside that release markets will also receive the latest lending data for June, a figure that is likely to create as much market volatility as the trade data in light of recent tightness across the money markets. While there will be doubts over the authenticity of the trade data, there’ll have to be given recent oddities, markets will likely run with the numbers no matter how they print.

While the Chinese data will dominate, investors will also receive export/import price growth, unemployment and money supply figures from Korea along with Japanese consumer confidence.

The big data events continue to arrive this evening with the FOMC minutes from the June 18-19 meeting, along with a speech from Fed Chairman Ben Bernanke, likely to dominate proceedings. Given all the chatter surrounding tapering asset purchases in the months ahead, analysts, investors and traders alike will be going through both with a fine tooth comb for clues on the likelihood of a near-term exit. For those who like early morning rises, the FOMC minutes will be released at 4am with Bernanke due soon after at 6.10am. Before all the excitement at the end of the session, we’ll also receive industrial output figures from France, Italy and Greece, German CPI and wholesale sales and inventories from the US.




 














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