Daily Market Update 30 August 2013 - Market stabilisation continues, for now

Daily Market Update 30 August 2013 - Market stabilisation continues, for now

US economic growth rose stronger than what had been first estimated in Q2 with an annualised increase of 2.5% reported<http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm>. The rate was far stronger than the 1.1% pace of Q1, the initial estimate of 1.7% and expectations for an increase to 2.2% and marked the fastest pace of growth since Q3 2012. While important by itself, perhaps of more significance given ongoing concerns about near-term Fed tapering, ‘core’ PCE price inflation, the FOMC’s preferred measure of price pressures, held at an annual pace of just 0.8%, the lowest level seen since Q4 2010.


US initial jobless claims fell last week with a decrease of 6k reported<http://www.dol.gov/opa/media/press/eta/ui/current.htm>. The result was fractionally better than the 332k figure that had been expected by the markets with the 4-week rolling average, a less-volatile gauge of labour market strength, inching up by 750 to 331,250.

Canadian producer price inflation rose less-than-expected in July with an increase of 0.3% reported<http://www.statcan.gc.ca/daily-quotidien/130829/dq130829b-eng.pdf>. While below the 0.4% pace that had been expected by the markets, with stronger data from last year exiting the data series, the annual pace picked up to 1.4% from 0.5% in June.


German inflationary pressures eased in August with an annualised increase of 1.5% recorded<https://www.destatis.de/EN/PressServices/Press/pr/2013/08/PE13_290_611.html>. The figure was below both the 1.9% rate of July and expectations for a fall to 1.7%.


German unemployment rose unexpectedly in August with an increase of 7K recorded<https://www.destatis.de/EN/PressServices/Press/pr/2013/08/PE13_287_132.html>. The increase, the first seen since May this year, missed expectations for a decrease of 5k and left the total number out of work at 2.943m. Despite the overall increase, the unemployment rate held steady at 6.8% for a fourth-consecutive month.


French manufacturing confidence rose more-than-expected in August with INSEE’s business climate index<http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20130829> rising to 98. The figure was higher than both the 95 reading of July and expectations for an increase to 96.


French industrial investment<http://www.insee.fr/en/themes/info-rapide.asp?id=15&date=20130829> continued to contract in the year to June 30, falling 6% following a 4% decline in Q1.


Italian consumer confidence rose for a third-consecutive month in August with an increase to 98.3 recorded<http://www.istat.it/en/archive/97915>. The figure was higher than both the upwardly-revised 97.4 reading of July and expectations for an increase to 97.8 and was the highest level seen since July 2011. Mirroring the improvement there, business confidence<http://www.istat.it/en/archive/97956> also jumped, rising 1.1pts to 92.9, the highest level achieved since November 2011.


Italian wage inflation rose fractionally in July with an increase of 0.1% reported<http://www.istat.it/en/archive/97978>. The figure was half the 0.2% rate of June and left the year-on-year rate at a benign 1.5%.


Spanish Q2 GDP was confirmed at 0.1% overnight with the year-on-year contraction revised down to ‘just’ 1.6%.


Spanish inflationary pressures eased in the year to August with an increase of 1.6% reported<http://www.ine.es/en/daco/daco42/daco4218/ipce0813_en.pdf>. While above the 1.5% rate expected by the markets, the result was down on the 1.7% increase previously seen in July.

Swiss non-farm payrolls rose for a second-consecutive quarter in Q2 with an increase of 1.7% recorded. The increase left the total number employed at 4.166m, an all-time record high.


The Day Ahead (All times AEST)


Tap Oil and Virgin Australia headline the domestic earnings calendar today.


Despite gains in offshore markets overnight, the ASX 200 look set to kick off the day marginally in the red with SPI futures pointing to a fall of 14pts on the open. Despite large falls in commodity prices overnight, largely on the back of a stronger US Dollar and easing concerns over Syria, with the index up 0.8% so far in August, it wouldn’t shock to see month-end window dressing push the index into positive territory by the end of today’s session.


The AUDUSD eased lower overnight on the back of stronger-than-expected US data with the pair touching a low of 0.8918 before inching higher into the close. While tapering expectations tend to drive the pair in offshore trade, with a raft of Japanese data releases scheduled for today, something that tends to determine overall USD strength, we expect the pair to have an inverse correlation to USDJPY, at least in the early parts of trade. Support starts at .8918, .8890 and .8850 with resistance kicking in at .8930, .8980-90 and against .9037.


Australian private sector credit figures for July will be released at 11.30am. Markets are looking for a now-customary 0.3% increase following in 0.4% rise in June. As has been the case for well over a year, if there is to be another increase, it’ll likely derive from a rise in housing credit.


Abenomics will be back in focus today with the release of CPI, household spending, housing starts and construction orders in Japan. Elsewhere we’ll also receive building starts in New Zealand along with the GfK consumer sentiment survey from the UK.


No rest for the markets this evening with a busy data calendar scheduled to end off the week. In the US we’ll receive PCE inflation, a release that also encompasses both consumption and incomes data, Chicago PMI along with the final read on consumer sentiment from the University of Michigan. Alongside those numbers markets will also have to digest unemployment figures from the Eurozone and Italy, retail sales from Germany, Spain and Greece, Bank of England lending data and the Nationwide house price index from the UK, CPI and PPI figures from Italy along with Canadian GDP.


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