Daily Market Update 23 August 2013 - Taper tantrum tempered, temporarily

Daily Market Update 23 August 2013 - Taper tantrum tempered, temporarily

Eurozone manufacturing activity accelerated at a faster-than-expected pace in August with Markit’s PMI gauge<http://www.markiteconomics.com/Survey/PressRelease.mvc/fd58998f084a468c8df4ba5b07d4754b> rising to 51.3. The figure was ahead of both the 50.3 reading of July and expectations for an increase to 50.8 with Germany<http://www.markiteconomics.com/Survey/PressRelease.mvc/aca6a0c2f9ea4c13a1a33a78a2d4f84f>, the manufacturing hub of Europe, seeing their figure soar to a 13-month high of 52.0. While not as strong as their industrial counterparts, service-sector activity also impressed, rising into positive territory for the first time since early 2012 with a reading of 51.0 recorded. The figure beat expectations for an increase to 50.2 with Germany yet again doing most of the heavy lifting with their gauge surging to 52.4. While a good outcome for the region, showing that improved German activity was almost entirely behind the move, France<http://www.markiteconomics.com/Survey/PressRelease.mvc/547cb0f2e4bd47a791b811e256927034>, Europe’s second-largest economy, disappointed on all fronts with their manufacturing reading holding steady at 49.7, below the 50.2 figure expected, while service-sector activity went into reverse, logging a reading of 47.7 from 48.6 in July. While one figure does not start a trend, it does beg the question whether we’re seeing a broad-based recovery in Europe or simply another bout of outperformance from Germany? Given that this is not a new phenomenon, markets will be paying close attention to the data ahead for clues on the sustainability of the regional recovery.


US jobless rose modestly last week with an increase to 336k reported<http://www.dol.gov/opa/media/press/eta/ui/current.htm>. The result was fractionally above the 330k figure that had been expected by the markets and some 13k more than the previous corresponding week with the 4-week moving average, a less-volatile guide to the overall trend, falling to 330,500, the lowest level seen since November 2007.


US manufacturing activity expanded at faster pace in August with Markit’s flash PMI<http://www.markiteconomics.com/Survey/PressRelease.mvc/3098549eef6c47e6a5fafaa84ae66cd8> gauge rising to 53.9. While above the 53.7 reading of July, the result was fractionally below the 54.0 print expected by economists.


US house prices continued to push higher in June with the FHFA reporting<http://www.fhfa.gov/webfiles/25483/2013Q2HPI82213Final.pdf> an increase of 0.7%. While below the upwardly-revised 0.8% increase of May, the result left the year-on-year rate at 7.7%, up from 7.3% previously.


The US leading index, a guide to potential economic growth in the months ahead, rose strongly in July with an increase of 0.6% recorded<http://www.conference-board.org/pdf_free/press/PressPDF_4915_1377160732.pdf>. The result was above the 0.5% gain that had been expected by the markets and well ahead of the flat reading seen in May.


Manufacturing activity in Kansas City and surrounds continued to expand in August with the regional Fed index<http://www.kc.frb.org/publicat/research/indicatorsdata/mfg/pdf/2013Aug22mfg.pdf> rising to 8. The result was above the 6 reading previously seen in July with a jump in new orders, 15 from 5, and higher inventories of finished goods, 4 from 1, the chief catalysts behind the continued improvement.


Canadian retail sales slipped in June with a decrease of 0.6% reported<http://www.statcan.gc.ca/daily-quotidien/130822/dq130822a-eng.pdf>. While below expectations for a decline of 0.4%, putting the fall in context, the contraction came on the back of a downwardly-revised 1.8% splurge in May. While the headline result was reasonable with the two results added together, ‘core’ sales, those excluding autos, missed badly to the downside, falling 0.8% against expectations for flat growth during the month.


The Swiss trade surplus narrowed fractionally in July with a figure of ₣2.38b reported. The result was below the upwardly-revised ₣2.82b surplus of June with a 3% year-on-year increase in exports outpaced by a 6.9% rise in imports.


The Day Ahead (All times AEST)


Crown, IOOF Holdings, Lend Lease and Mirvac headline the domestic earnings calendar today.


The ASX 200 looks set to take back all of yesterday’s losses this morning, and then some, with SPI futures pointing to a rise of 43pts on the open. While the index will start off strong, with the rally overnight more due to positioning rather than a ebbing of tapering concerns, it wouldn’t surprise to some early gains taken back as we head towards the close.


A non-eventful session for the AUDUSD overnight with the pair trading in a relatively-thin range between .8980 and .9040. With push and pull factors tugging at the pair at present, we expect more of the same in Asia with traders likely to test both topside and downside levels before the day is out.


Chinese foreign direct investment for July will be released at Midday AEST.


Economic data releases this evening include second-round Q2 GDP figures from the UK and Germany, US new home sales, Eurozone consumer confidence, Canadian CPI along with industrial output figures from Taiwan. On the policy front, the Jackson Hole economic symposium continues in Wyoming.



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