Daily Market Update 26 July 2013 - Late taper-fuelled rally saves the day
US durable goods orders surged during June with an increase of 4.2% reported. The figure was over three-times greater than the 1.3% rise that had been expected by the markets and came on the back of an upwardly-revised 5.2% increase in May. While the headline number was strong, ‘core’ orders, those which exclude lumpy transport and military items, rose by a more benign 0.7%, a result that was slightly ahead of estimates for an increase of 0.5%. Breaking the core component down even further, it became clear that a large order with aircraft manufacturer Boeing was behind the headline beat with orders ex-transportation items coming in flat for the month.
US initial jobless claims rose modestly last week with an increase to 343k recorded. The figure was 7k more than the prior corresponding week and was slightly above estimates for an increase to 340k.
Manufacturing activity in Kansas City and surrounds expanded strongly in July with the regional Fed index surging to 21. The result was a substantial improvement on the -17 score previously seen in June.
The UK economic upswing continued during the June quarter with the ONS reporting an increase in GDP of 0.6%. The result was in line with market expectations and left the annualised increase at 1.4%. While a pleasing result, underlining the low base the reading is based off, the economy is estimated to be some 3.3% smaller than it was prior to the onset of the global financial crisis.
German business confidence inched higher during July with the IFO business climate index rising to 106.2. The reading was above expectations for an increase to 106.1 with a slight ‘beat’ in current conditions (110.1, 109.7 exp) helping to offset a ‘miss’ in future expectation (102.4, 102.5 exp).
Private lending across the Eurozone contracted at a faster-than-expected pace last month with the ECB reporting an annualised decline of 1.6% in June. The result was below the 1.1% contraction that had been expected by the markets and marked the fastest annual decline seen since records began in 1992.
Spanish unemployment fell for the first time in two years during Q2 with the official unemployment rate sliding to 26.26%. The result was below both the 27.16% rate of Q1 and expectations for an increase to 27.2% with the number of unemployed falling to 5.98m.
Italian consumer confidence rose for a second-consecutive month during July with an increase to 97.3 reported. The result was higher than both the upwardly-revised 95.8 reading of June and expectations for an increase to 96.0.
The Day Ahead (All times AEST)
The ASX 200 looks set for a flat start this morning with SPI futures pointing to a decline of 1pt on the open. While we may push higher initially following the late taper-fuelled rally on Wall St, with little in the way of market-moving news to dictate direction, we expect that interest in the session will quickly diminish with investors likely to sit tight until major data events arrive next week.
Assisted by rumours that the Federal Reserve won’t begin tapering asset purchases when they next week, something that was never likely to occur anyway, the AUDUSD has squeezed higher overnight with the pair hitting a high of .9281 before easing into the close. Given the proximity to stops placed above Wednesday’s high of .9317, it wouldn’t surprise to see the pair push higher today with traders likely to target this level in thinned-out Friday conditions. Support is found at .9244 and again at .9222 with resistance kicking in at .9281, .9300 and again ahead of .9317.
Abenomics will be back in focus this morning with the release of Japanese CPI data for July. Economists expect the headline rate to show prices rose 0.1% in the year to July with the ‘core’ reading also expected to improve to -0.3% (9.30am)
The economic data calendar ‘tapers’ to end off the week with the Uni of Michigan consumer sentiment survey (final read) in the US, German import prices and French consumer confidence the only releases of note.