Daily Market Update 30 July 2013 - Domestic focus returns to the fore
US pending home sales fell slightly in June after logging a downwardly-revised 5.8% increase in May with a decline of 0.4% reported. The figure beat estimates for a fall of 1.0% and left the year-on-year advance at 10.9%.
Manufacturing activity across the Chicago Fed district inched higher in June with the Midwest manufacturing index rising to 96.0. The result was a slight improvement on the 95.6 reading of May with all four industry components logging increases for the month. In a separate report, activity across the Dallas Fed region continued to expand in July, albeit at a slower pace, with the index slipping to 4.4 from 6.5 in June.
UK retail sales rose for the first time in five months in July with the CBI distributive trades survey rising to +19. The result was well ahead of the +1 reading of June and marked the fastest pace of growth seen since January this year. Despite the increase, given seasonality was attributed to much of the increase, sales are expected to fall in August with the expectations index coming in at +10.
UK consumer credit growth missed to the downside in June with an increase of £0.5b reported. The result was down on expectations for a rise of £0.7b and well short of the £0.8b expansion previously seen in May. While consumer demand was down, it was a different story on the mortgage front with new lending rising by £1b over the month. The figure dwarfed expectations for a rise of £0.5b and was the highest level recorded since April of this year.
Italian business confidence rose for a third consecutive month in July with an increase to 91.7 reported. The figure was higher than both the upwardly-revised 90.5 reading of June and expectations for an increase to 91.0.
Italian wages ticked higher in June with an increase of 0.2 reported. The figure was above the flat reading seen in May and left the annualised rate at 1.5%.
The Day Ahead (All times AEST)
RBA Governor Glenn Stevens speaks in Sydney from 1.05pm. Given current market expectations for a rate reduction in August, cash rate futures suggest a 77% chance that we’ll see the cash rate at 2.50%, this speech looms large as an opportunity for the Governor to correct current expectations should he deem it necessary. Following the Q2 CPI data last week, markets will be paying close attention to any views on the inflation outlook along with the level of the Australian Dollar.
Australian building approvals for June will be released at 11.30am. Economists are looking for an increase of 2.3% having fallen 1.1% in May. As ever, keep an eye out for the private home approvals number released alongside the headline data. Given the RBA are looking for home construction to help offset the slowdown in the mining boom, should we see a sixth-consecutive monthly increase, it will no doubt raise the question as to whether or not we’ll see a further rate cut in August.
Having ignored the regional selloff across major Asian indices yesterday, the ASX 200 looks set to remain in its Teflon-like state this morning with SPI futures pointing to a rise of 4pts on the open. With no firm lead to guide direction, RBA Governor Glenn Stevens’ speech at 1.05pm, along with the building approvals data released earlier in the session, will likely dictate direction. While any move will likely be limited before month-end tomorrow, should we get surprisingly-strong data and a neutral-sounding Stevens, expect moderate pressure to be applied to higher-yielding plays.
The AUDUSD has opened sharply lower this morning with the pair currently fetching .9205. With interest rate markets pricing in a 77% chance that we’ll see a rate cut in August, coupled with major domestic events ahead, it wouldn’t surprise to see the pair push higher this morning on the back of modest short covering. As you would expect with rampant rate cut expectations, if there is a risk leading into these events, it’s clearly biased to the upside. Support is found at .9190. Resistance .9230, .9280.
Regional releases today include unemployment, industrial production and household spending figures from Japan, industrial and service-sector output figures from South Korea along with New Zealand building consents for June.
Data releases this evening include the Caseshiller house price survey and consumer confidence from the States, consumer sentiment and CPI from Germany, GDP and CPI from Spain, Eurozone economic and consumer sentiment along with Canadian producer prices. On the policy front, the Reserve Bank of India (RBI) hold their July monetary policy meeting.
Chrysler, Merck & Co, Office Depot, Pfizer and Western Union report Q2 earnings this evening.