Daily Market Update 4 September 2013 - Syria support offsets robust economic data

Daily Market Update 4 September 2013 - Syria support offsets robust economic data

Complementing the upswing seen in most other nations in August, US manufacturing activity expanded at the fastest pace seen since June 2011 last month with the ISM’s manufacturing PMI gauge<http://www.ism.ws/ismreport/mfgrob.cfm> rising to 55.7. The result was above both the 55.4 reading of June and expectations for a decrease to 54.0 with a strong bounce in new orders, up to 63.2, the highest reading since April 2011, largely behind the strong monthly result. While the ISM reading was undeniably strong, Markit’s PMI gauge<http://www.markiteconomics.com/Survey/PressRelease.mvc/2d624187f3e9463196a640620bd19b4c>, a complementary reading into current manufacturing activity, expanded at a slower pace during August, falling to 53.1 from 54.8 in June.


US construction spending rose modestly in the year to July with an increase of 0.6% to $900.8b reported<http://www.census.gov/construction/c30/pdf/release.pdf>. The result doubled expectations for a rise of 0.3% and left total construction spend at the highest level seen since June 2009. In what is a pleasing sign, private expenditure did all of the heavy lifting, rising 0.9%, while public spending went into reverse, falling 0.3%.


Canada manufacturing activity expanded at a fractionally faster pace in August with the RBC manufacturing PMI gauge<http://www.rbc.com/newsroom/pdf/CA_Manufacturing_ENG_1309_PR.pdf> rising to 52.1 from 52.0 in July.


Eurozone producer prices rose strongly during July with an increase of 0.3% reported<http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-03092013-AP/EN/4-03092013-AP-EN.PDF>. While three-times higher than market expectations, with stronger data rolling off the data series, the year-on-year rate fell back to +0.2% from +0.3% in June.


Making it two-from-two in terms of PMI prints, UK manufacturing activity expanded at the fastest pace since September 2007 in August with Markit’s construction PMI gauge<http://www.markiteconomics.com/Survey/PressRelease.mvc/b5cf3f28affa4cef883f6c59976b0ee2> surging to 59.1. The result was ahead of the 57.0 reading of July and expectations for a decline to 56.8 with strong residential activity the chief catalyst behind the impressive monthly result.


Spanish unemployment held steady in August after falling heavily in July with a decline of 31 persons reported. The result was below the 64.9k fall of July and expectations for a decrease of 5.2k with seasonality largely to blame for sudden stall in hiring.


Switzerland’s economy grew faster-than-expected in the three months to June with an increase of 0.5% reported. The figure was well ahead of the 0.2% expansion that had been expected by economists and left the annualised rate at 2.50%, up from the 1.2% pace of Q1.


The Day Ahead (All times AEST)


The ASX 200 looks set to open sharply lower this morning with SPI futures pointing to a fall of 38pts on the open. While this is reflective of heightened geopolitical concerns<http://www.bloomberg.com/news/2013-09-03/israel-rattles-markets-with-missile-test-as-obama-works-congress.html> surrounding Syria, something that saw US stocks give back almost all their early gains, given strength across the commodities complex, robust data elsewhere and resilience seen of late, we don’t envisage that it’ll end up being a horror session with the index likely to creep off the lows established in the early parts of trade.


The AUDUSD has responded to renewed concerns over Syria by moving higher, thanks largely to a surge in the spot gold price, with the pair currently fetching .9050. While there is some merit in the Aussie pushing higher, we are a major gold exporter, global data has been improving and the RBA seem to be at-or-near the end of their easing cycle, given heightened geopolitical concerns and downside risks that loom with the release of today’s Q2 GDP report, we expect that the pair will come under renewed selling pressure before the day is out. Support is found at .9020 and between .8990-.9000 with resistance kicking in at .9060, .9100 and at .9108.


Australian economic growth will be in focus this morning with the release Q2 GDP at 11.30am. Economists are looking for growth of 0.6% for the quarter, a result that will leave the year-on-year expansion at 2.5%. Before the excitement of that release, we’ll also receive the AIG Performance of Services index for August at 9.30am.


Service-sector activity dominates the regional calendar with services PMI gauges from regional heavyweights China (11.45am) and India (3pm), along with smaller nations, scheduled for release.


Data releases this evening include services PMI, retail sales and revised Q2 GDP from the Eurozone, MBA mortgage market index, Challenger Layoffs series and ISM New York manufacturing index from the US, trade figures from Canada, French producer prices along with the Halifax house price survey in the UK. On the policy front, the Fed release their Beige Book of Economic Conditions while the Bank of Canada announce their September monetary policy decision.


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