Daily Market Update 5 September 2013 - Global growth outlook offsets Syria, this time
Eurozone service-sector activity returned to growth in August with Markit’s PMI gauge<http://www.markiteconomics.com/Survey/PressRelease.mvc/83eb8041afdc454d8510e3951cead070> rising to 50.7. Despite being below the 51.0 ‘flash’ estimate released in late August, the reading was higher than the 49.8 figure of July and marked the first month of expansion seen since August 2011. Of the ‘Big 4’ nations, Germany<http://www.markiteconomics.com/Survey/PressRelease.mvc/a16df9608164405a96a13d8a5ea4e657>, France<http://www.markiteconomics.com/Survey/PressRelease.mvc/67c7f4b845e0420b8bb05949c3e960f6>, Italy<http://www.markiteconomics.com/Survey/PressRelease.mvc/c06756e0924443d4a8d4891b62748cb9> and Spain<http://www.markiteconomics.com/Survey/PressRelease.mvc/8cde34ef99e9416d96ef8ef97394c9c8>, all showed improvement with Germany and Spain both expanding, recording scores of 52.8 and 50.4, while France and Italy saw activity contract moderately with readings of 48.9 and 48.8 respectively.
Making it a ‘hat-trick’ of strong activity readings, UK service-sector activity expanded at the fastest since December 2006 in August with Markit’s PMI gauge<http://www.markiteconomics.com/Survey/PressRelease.mvc/291fe2a94ee040bcb216d84676428f92> surging to 60.5. The figure was above the already-lofty 60.2 reading of July and expectations for a fall to 59.0 with new orders, a key component on likely activity ahead, storming to 61.3, the highest reading seen since 1997.
Eurozone Q2 GDP<http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-04092013-BP/EN/2-04092013-BP-EN.PDF> was confirmed at +0.3% overnight. While in line with expectations, with upward revisions to prior data, the year-on-year contraction was revised up to -0.5% from -0.7% previously.
Eurozone retail sales disappointed to the downside in July with an increase of 0.1% reported<http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-04092013-AP/EN/4-04092013-AP-EN.PDF>. The figure missed expectations for a rise of 0.4% and left the year-on-year contraction sharply lower at -1.3%.
The Federal Reserve released their latest Beige Book of Economic Conditions overnight with no major surprises coming from the document. To read it in full, click here<http://www.federalreserve.gov/monetarypolicy/beigebook/files/Beigebook_20130904.pdf>.
As expected, the Bank of Canada left their key benchmark interest rate steady at 1% overnight. To read their accompanying monetary policy statement, click here<http://www.bankofcanada.ca/2013/09/publications/press-releases/fad-press-release-2013-09-04/>.
The US trade deficit rose more-than-expected during July with an increase to $39.22b reported<http://content.govdelivery.com/attachments/USESAEI/2013/09/04/file_attachments/235673/International%2BTrade%2B%2528July%2B2013%2529.pdf>. The figure was fractionally above expectations for an increase to $38.7b and was far wider than the $34.54b deficit of June with an increase in imports, +1.6%, and decrease in exports, -0.5%, behind the monthly expansion.
US mortgage demand rose for only the third time in the past 17 weeks last week with an increase of 1.3% reported. The result was a sharp improvement on the 2.5% decline recorded in the previous corresponding week with a 2.4% gain in refinancing able to offset a 0.4% decline for new purchases. Perhaps explaining the modest improvement, the average 30-yr mortgage rate fell back over the week, declining 7bps to 4.73%.
Mirroring the performance of their neighbour to the South, Canada’s trade deficit grew modestly in July with an increase to $930m reported<http://www.statcan.gc.ca/daily-quotidien/130904/dq130904a-eng.pdf>. The figure was near-triple expectations for a decrease to $350m and doubled the $460m deficit of June with a 0.6% rise in imports, coupled with a 0.6% fall in exports, behind the surprise result.
French producer prices came in far hotter-than-expected for July with an increase of 0.7% recorded<http://www.insee.fr/en/themes/info-rapide.asp?id=25&date=20130904>. The result was well above expectations for a rise of 0.2% and came on the back of a 0.2% decline in June.
The Day Ahead (All times AEST)
The ASX 200 looks set to start of moderately in the black with SPI futures pointing to a rise of 16pts on the open. While commodity prices have been hit across the board, we expect that the physical index will outperform SPI today with a close above the 5,200-point level likely.
The $AUDUSD has continued to march higher overnight with the pair touching a high of .9187 before easing into the close. While positioning is now far more neutral given the spate of short-covering we’ve seen in recent days, with momentum clearly bullish and the global economy on improve, it looks likely that the pair will head back to the August high of .9232 in the days ahead. Support starts at .9150 and ahead of .9100 with resistance kicking in at .9187, .9217 and again at .9232.
Australian trade data for July will be released at 11.30am Economists are looking for a surplus of $110m after recording a $602m surplus in June.
Regional data releases today include revised Q2 GDP from South Korea, foreign stock and bond purchases from Japan along with Taiwanese CPI. On the policy front, the BoJ will announce their September monetary policy at some point this afternoon. In what is a general rule of thumb, the longer it takes to release, the more the BoJ Board will have to say.
The data flow goes up a notch this evening with major data releases in the US, along with monetary policy decisions from the ECB and BoE, set to dictate direction. On the data front we’ll receive the ADP national employment report for September, jobless claims, non-manufacturing PMI, factory orders and Q2 productivity and labour costs from the US, German industrial orders, French unemployment along with CPI figures from the Netherlands. On the monetary policy front, the Bank of England will release their September rate decision at 9pm with the MPC certain to leave the bank rate and asset purchase program steady at 0.5% and £375b respectively. While we’re never quite sure if we’ll receive an accompanying policy statement, if they do indeed release one along with the rate decision, it’ll have to be more upbeat given the recent stellar run of data. Rounding off the session, the ECB also announce their September policy decision at 9.45pm with ECB President Mario Draghi set to face reporters soon after at 10.30pm. While he’ll likely sound more optimistic, it will be interesting to see how he manages to convey that message without sending the Euro hurtling higher.