Daily Market Update 28 August 2013 - Syria and strong data dampen risk assets
US consumer confidence rose unexpectedly during August with the Conference Board index<http://www.conference-board.org/press/pressdetail.cfm?pressid=4918> coming in at 81.5. The figure was above the upwardly-revised 81.0 reading of July and expectations for a decline to 79.0 with a jump in the expectations sub-index, up to 88.7 from 86.0, able to offset a 2.9pts slide in current conditions (70.7).
US metropolitan house prices continued to march higher in June with the CaseShiller house price index<https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/35529_cshomeprice-release-0827.pdf?force_download=true> rising 0.9% in seasonally adjusted terms. While down on the 1.0% pace that had been expected by the markets, the result left the year-on-year advance at 12.1%, the same reading seen in May.
Manufacturing activity across the Mid-Atlantic States rebounded strongly in August with the Richmond Fed manufacturing index<http://www.richmondfed.org/research/regional_economy/surveys_of_business_conditions/manufacturing/2013/pdf/mfg_08_27_13.pdf> soaring to +14. The reading was above the -11 figure previously seen in July with improvements in labour-orientated sub-components, employment, wages and average workweek, largely responsible for the sharp monthly turnaround.
Manufacturing activity in Chicago and surrounds continued to contract in July with the Midwest manufacturing index<http://chicagofed.org/digital_assets/publications/cfmmi/2013/cfmmi_july_2013.pdf> slipping to 95.8. The reading was fractionally below the 95.9 reading of June with declines in auto and machinery production largely offset by a 1.5% bounce in steelmaking.
German business confidence continued to rise in August with the IFO business climate index<http://www.cesifo-group.de/ifoHome/facts/Survey-Results/Business-Climate/Geschaeftsklima-Archiv/2013/Geschaeftsklima-20130827.html> coming in at 107.5. The reading was above both the 106.2 figure of July and expectations for an increase to 107.0 with current conditions (112.0, +1.9) and future expectations (103.3, +0.9%) rising over the month.
A raft of GDP revisions<http://www.ine.es/en/prensa/np795_en.pdf> from Spain’s INE overnight, most of them lower, with 2011 economic growth revised down to 0.1% from 0.4% while 2012’s contraction, formerly 1.4%, now stands at -1.6%.
The Day Ahead (All times AEST)
Another busy session on the domestic earnings front with AGL, Transfield Services, Woolworths and Wotif.com just some of the better-known names that are scheduled to report.
An ugly session for the ASX 200 awaits today, at least according to futures pricing, with SPI settling the overnight session down 55pts. While this is reflective of the sharp losses on Wall St, with precious metals and crude both sharply higher, coupled with moderate losses across the rest of the materials space, it wouldn’t surprise to see the index trim its losses over the course of the session. The caveat on this is of course no further escalation in geopolitical concerns surrounding Syria or a sharp selloff in Asia, particularly the emerging markets.
Defying geopolitical concerns over Syria and another strong batch of US economic data, the AUDUSD has moved higher overnight with the pair currently sitting at .8986. Support is found at .8983, .8963 and again at .8930 with resistance kicking in at .9000, .9050 and .9069.
Australian Q2 construction work completed will be released at 11.30am this morning with economists looking for a rise of 1.6% following a 2% decline in Q1. While in the past this release has been overshadowed by the capital expenditure figures within the national accounts, given the RBA are looking for construction to offset the slowdown in mining-sector investment, expect this release to have a far greater market impact than what has been witnessed in the past.
Data releases this evening include pending homes sales and MBA mortgage market index in the US, GfK consumer sentiment and import prices from Germany, retail sales from Italy and the UK along with Eurozone private lending. On the policy front, Bank of England Governor Mark Carney will appear before the UK parliament, an event that will make for interesting viewing given the markets have largely dismissed the banks’ recently-implemented forward guidance on rates.