Daily Market Update 16 August 2013 - Bullish data, bearish price action
US CPI edged higher in July with an increase of 0.2% reported<http://www.bls.gov/news.release/pdf/cpi.pdf>. The result was in line with market expectations with the year-on-year rate ticking up to 2.0%. Mirroring the headline figure, ‘core’ inflation, that which excludes volatile items such as food and fuel, rose by 0.4%, a result that left the annualised rate 0.1% higher at 1.7%. While inflation remained subdued, with it increasing while average hourly earnings fell, real weekly earnings slid for a second-straight month, declining 0.5% against expectations for a fall of 0.2%.
US jobless claims fell to the lowest level since October 2007 last week with a figure of 320k reported<http://www.dol.gov/opa/media/press/eta/ui/current.htm>. The result was well below the 335k pace expected by economists with the 4-week rolling average, often regarded as a more reliable figure, falling to 332k, the lowest level seen since November 2007.
US industrial output<http://www.federalreserve.gov/releases/g17/current/g17.pdf> missed to the downside in July with flat growth recorded during the month. The result missed expectations for an increase of 0.3% with a 0.1% fall in manufacturing output, largely due to reduced auto production, and a 2.1% decline in utilities offsetting a 2.1% rise in mining-sector output.
US homebuilder confidence soared to the highest level seen since November 2005 in August with the NAHB index<http://www.nahb.org/news_details.aspx?newsID=16428> rising to 59. The result was above both the downwardly-revised 56 reading of June and expectations for a decrease to the same level.
Manufacturing activity across the New York state continued to expand during August, albeit at a slower pace than expected, with the NY Fed’s Empire<http://www.newyorkfed.org/survey/empire/empire2013/2013_08Report.pdf> State Index coming in at 8.24. While below both the 9.46 figure of July and expectations for an increase to 10.0, it was interesting to see the survey’s employment subindex surge to 10.84 from 3.26 in July, the highest reading achieved since August last year.
Mirroring the performance seen in the Empire State survey, manufacturing activity in Philadelphia and surrounds expanded at a slower-than-expected pace in August with the Philadelphia Fed business index<http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2013/bos0813.pdf> sliding to 9.3. While still in positive territory, the result was well below the 19.8 reading of July and expectations for a decrease to 15.0 with all the major components, including employment, falling over the month.
UK retail sales surged in July with an increase of 1.1% reported<http://www.ons.gov.uk/ons/dcp171778_323522.pdf>. The result was near-double the 0.6% increase that had been expected by the markets with the year-on-year rate rising to a 2-year high of 3.0%. Showing the gains were broad-based, sales excluding fuel also jumped 1.1% with the annual rate soaring to 3.1%. While the monthly outcome was strong, showing this is certainly more than a ‘one-off’, the 3-month rise in total sales, +1.8%, was the largest expansion seen since March 2004.
The Day Ahead (All times AEST)
The ASX 200 looks set to start off today’s session deep in the red with SPI futures pointing to fall of 36pts on the open. While this reflects the deep losses seen on Wall St on the back of tapering fears, with commodity prices mixed and the Aussie Dollar firm, it wouldn’t surprise to see ‘bargain-hunting’ emerge today following the initial selloff.
A wild ride for the AUDUSD overnight with the pair falling to as low of .9060 before screaming higher into the close. Given its resilience overnight, driven in part by short positioning and firm commodity prices, it wouldn’t surprise to see the pair continue to be well supported despite the looming threat of tapering from the Fed. Support is found at .9123, .9107 and again below .9080 with resistance arriving at .9140, .9155 and .9180.
RBA Assistant Governor Guy Debelle speaks in Sydney from 11.30am. Given the title of his speech, ‘The impact of payments system and prudential reforms on the RBA’s provision of liquidity’, it’s unlikely it’ll have any implications for monetary policy.
Chinese foreign direct investment for July will be released at 12 noon.
Another US-centric data calendar to end off the week with housing starts, building permits, Q2 labour costs and productivity along with the Uni of Michigan consumer sentiment survey scheduled for release. Elsewhere we’ll receive manufacturing sales in Canada along with inflation, trade and current account figures from the Eurozone.