Daily Market Update 6 September 2013 - US data impresses, non-farm tonight

Daily Market Update 6 September 2013 - US data impresses, non-farm tonight

US private-sector hiring cooled in August with the closely-watched-yet-highly-volatile ADP employment report<http://www.adpemploymentreport.com/2013/August/NER/NER-August-2013.aspx> coming in at 176k. The figure was below both the 198k figure of July and expectations for a decrease to 184k.


US initial jobless claims fell sharply last week with a decrease to 323k reported<http://www.dol.gov/opa/media/press/eta/ui/current.htm>. The result was below both the upwardly-revised 332k pace of the previous corresponding week and expectations for a decline to 330k. Stripping out week-to-week volatility, the 4-week rolling average, perhaps a better gauge of overall labour market strength, fell to 328,500, the lowest level seen since October 2007.


The number of planned US job cuts surged in August with the Challenger layoffs series<http://www.challengergray.com/press/PressRelease.aspx?PressUid=285> jumping by 33.8% to 50,462. The reading was 57% higher than the same month last year with total losses the largest seen since February 2013.


Mirroring and then exceeding most other readings globally, US service sector activity expanded at the fastest pace seen since December 2005 in August with the ISM PMI gauge<http://www.ism.ws/ismreport/nonmfgrob.cfm> surging to 58.6. The result was well ahead of both the 56.0 figure of July and expectations for a fall to 55.0 with new orders, a reliable lead indicator for activity in the months ahead, rising to 60.5, the highest level seen since February 2011.


US factory orders slipped in July with a decrease of 2.4% reported<http://www.census.gov/manufacturing/m3/prel/pdf/s-i-o.pdf>. The reading was slightly ahead of expectations for a decline of 3.3% and came on the back of a 1.6% rise in June. Explaining the weakness in the headline data, excluding transport orders, a lumpy item that tends to be influenced by new aircraft demand, orders rose by 1.2% after slipping 0.3% previously.


US Q2 productivity rose more than what had been initially thought in the June quarter with an increase of 2.3% reported<http://www.census.gov/manufacturing/m3/prel/pdf/s-i-o.pdf>. The reading was above the initial estimate of 1.5% with a 3.7% surge in output dwarfing a 1.5% rise in total hours worked.


Overnight the ECB kept their key refinancing and deposit rates<http://www.ecb.europa.eu/press/pr/date/2013/html/pr130905.en.html> steady at 0.5% and 0% respectively. In what was an uneventful<http://www.ecb.europa.eu/press/pressconf/2013/html/is130905.en.html> press conference following the rate decision, President Mario Draghi struck a dovish tone, something that was always likely despite stronger data of late, with risks to the growth outlook remaining to the ‘downside’. Small revisions were also made to their GDP and inflation forecasts with 2013 growth revised up to -0.4%, 2014 down to 1%, with 2013 inflation now expected to increase 1.5% from 1.4% previously.


As expected, the Bank of England left monetary policy steady<http://www.bankofengland.co.uk/publications/Pages/news/2013/009.aspx> overnight with the bank rate and asset purchase plan remaining at 0.5% and £375b respectively. Unfortunately for those looking for clarity behind the decision, no statement was released alongside the rate announcement.


German industrial orders fell sharply in July with a decline of 2.7% reported. The result was well below the upwardly-revised 5% increase of June and expectations for a fall of 1% with an 0.8% rise in intermediate goods orders offset by large declines in capital   (-5.1 %) and consumer orders (-1%). From an origination perspective, foreign orders were the chief catalyst behind the decline, falling -4.5%, with domestic demand little changed at -0.3%.


French unemployment rose to a fresh multi-decade high in the June quarter with an increase to 10.9% recorded<http://www.insee.fr/en/themes/info-rapide.asp?id=14&date=20130905>. The figure was higher than the 10.8% rate of Q1 and was the highest level seen since Q2 1998.

The Day Ahead (All times AEST)


The ASX 200 looks set to take back some of yesterday’s losses this morning with SPI futures pointing to a rise of 9pts on the open. Given that the federal election occurs tomorrow, something that tends to drag on the index based off historical data, the release of non-farm payrolls this evening and ongoing concerns surrounding Syria, where it’ll finish off the session is literally anyone’s guess.


The AUDUSD eased back overnight after its stellar run earlier in the week with the pair currently fetching .9119. With no major data scheduled during the Asia session, range trading is likely as participants bide their time until the payrolls report is released later on this evening. Strong support is located between .9100-9110 with resistance kicking in at .9150 and again at .9187.

The AIG-HIA Performance of Construction index for August will be released at 9.30am this morning. On the regional front we’ll also the Japanese leading index for July.


US non-farm payrolls for August will be released at 10.30pm this evening. Economists are looking for a rise in employment of 180k, an improvement on the 162k increase of July, with the unemployment rate expected to hold at 7.4% for a second-consecutive month. While nothing special is expected from the headline data, reflecting stronger labour market conditions, hourly earnings (+0.2%) and the average workweek (+0.1 hours) are expected to improve after falling unexpectedly in July. As is often the case, keep an eye out for revisions to previous months data - they’re often more influential on markets than the current data overall.


Besides the non-farm payrolls release, another busy data calendar arrives this evening with major events scheduled on both sides of the Atlantic. In Europe trade statistics will dominate proceedings with Germany, France, Italy, Portugal and UK all scheduled to report data for July. Elsewhere we’ll also receive budget and consumer confidence figures from France, industrial output and NIESR GDP estimate from the UK, Swiss CPI and industrial orders along with German industrial output. While all attention will be on the payrolls data, Canada will also release unemployment figures for August.


Chinese trade figures for August will be released over the weekend.


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