Daily Market Update 19 July 2013 - Quiet end to what has been a quiet week
In a sign that Fed tapering could arrive sooner-rather-than-later, US initial jobless claims fell heavily last week with a decline of 24k reported. The 334k figure was well ahead of estimates for a decline to 345k and the 358k pace recorded in the previous corresponding week and was the lowest level seen since May this year. While first-time claimants fell, continuing claims bucked the trend, rising by 91k to 3.114m, the highest level seen in over 5 months. While no statistical anomalies were reported in the data, one suspects the July 4 holiday, falling late in the prior week, may have something to do with the significant data beat.
Manufacturing conditions across the Philadelphia region expanded strongly in July with the Regional Fed index jumping to 19.8. The result more than doubled the 7.8 reading that had had been expected by the markets and was higher than the 12.5 number previously seen in June with sharp increases in the employment and outlook subindices behind the strong result.
The US leading index, a predictor of growth in the months ahead, came in flat for the month of June. The result was below expectations for an increase of 0.3% and was below the upwardly-revised 0.2% increase of May.
UK retail sales rose modestly in June with an increase of 0.2% reported. The result was in line with market expectations and left the year-on-year rate slightly higher at 2.2%. As was the case with the headline figure, sales excluding fuel also rose 0.2% on month, a result that left the annualised pace slightly lower than in May at 2.1%
Switzerland’s trade surplus rose strongly during June with an increase to ₣2.732b reported. The result was higher than the downwardly-revised ₣2.123b surplus of May with a 5.5% decline in exports outpaced by a 6.5% decline in imports (thanks entirely to the data not being adjusted for work days during the month).
Pushing aside renewed political concerns, the Spanish government held a successful auction of 3, 5 and 10-year debt overnight with yields falling modestly from previous, similarly-dated auctions. While demand was mixed compared to what had been seen previously, the auction of benchmark 10-year debt saw yields drop to 4.758% from 4.818% with the bid-to-cover ratio also rising from 1.71 to 2.26. Complementing the demand seen there, France, hit with a ratings downgrade by Fitch late last week, saw demand rise and yields fall as they staged an auction of medium-term debt.
The Day Ahead (All times AEST)
The ASX 200 look set to end the week above the 5000-point level today with SPI futures pointing to a rise of 20pts on the open. With metals and crude prices all higher overnight, it’s expected that most of the heavy lifting today will come from the materials and energy sectors.
Continuing on the slide started in Asia yesterday, the AUDUSD remained under the pump overnight with the pair sliding to a low of .9139 before rebounding modestly into the close. While anything could happen today, certainly the degree of selling yesterday did surprise us, with volumes and interest likely to wane over the course of the session, it’s likely we’ll see the pair end the week gently oscillating between .9139 and .9190.
New Zealand visitor arrivals for June will be released at 8.45am this morning.
A quiet economic calendar to end off the week with Canadian CPI, German producer prices, UK public sector borrowing along with Italian industrial orders and sales the only releases of note. G20 finance ministers also meet over the weekend although it is not expected to provide any major market-moving headlines.