Daily Market Update 9 September 2013 - Election result unlikely to be market moving
Creating further doubts over what the Federal Reserve will do in September, US non-farm payrolls<http://www.bls.gov/news.release/pdf/empsit.pdf> disappointed in August with job creation, downward revisions to prior data and weak participation completely offsetting a further decline in unemployment. Total employment rose by 169k, a result that missed expectations for an increase of 180k, with a 58k downward revision to July’s already-mediocre 162k figure making the result far worse than what the headline number would suggest. While job growth was disappointing, unemployment fell unexpectedly, down 0.1% to 7.3%, although this was largely on the back of participation falling to a 35-year low of just 63.2%. While there were some promising signs to suggest the recent labour market softness may be transitory, the average work week, hourly earnings and temporary hiring all increased, indicators that suggest the tempo of hiring may rise in the months ahead, given that payrolls growth has averaged 155k over the past four months, down on the 205k pace of the first four months of the year, it suggests the Fed may delay tapering until later in the year, or perhaps do a smaller $10b reduction in September, before taking more aggressive steps when it’s clear the labour market is again gaining ascendancy.
A mixed performance for Chinese trade in August with better-than-expected export growth offset a by sharp decline in imports. From a year earlier exports grew by 7.2%, higher than both the 5.1% pace of July and expectations for an increase to 6%, while import growth lagged, rising 7.2% after recording a 10.9% increase in the year to July. As you would expect given those figures, the trade surplus ballooned to $28.61b, the highest level seen since December 2012.
Canadian employment growth surged in August with an increase of 59,200 recorded<http://www.statcan.gc.ca/daily-quotidien/130906/dq130906a-eng.pdf>. The figure was near-triple the 20,000 rise that had been expected by the markets and completely offset the 39,400 decrease previously seen in July with fulltime (+17.4k) and part-time (+41.8k) work both increasing during the month. Making the result even stronger, unemployment fell 0.1% to 7.1% despite an overall increase in participation (+0.1%) to 66.6%.
German industrial output slumped in July after bouncing strongly during June with a decline of 1.7% reported. The figure missed expectations for a fall of 0.5% and was well below the downwardly-revised 2.0% increase of June with a surge in construction output, up 2.7%, unable to offset large declines in manufacturing (-2.1%) and energy (-2.9%) output.
German international trade<https://www.destatis.de/EN/PressServices/Press/pr/2013/09/PE13_298_51.html;jsessionid=04C51810BA87961661DE2A9F7B26AD45.cae3> figures disappointed in July with both exports and imports missing to the downside. Exports fell by 1.1% from June, below expectations for a rise of 0.8%, while imports increased by 0.5%, nearly half the rate expected. Given those outcomes, the trade surplus narrowed to €14.5b from €15.8b in June.
French consumer confidence rose to a six-month high in August with Insee reporting<http://www.insee.fr/en/themes/info-rapide.asp?id=20&date=20130906> an increase to 84. The figure was above both the 82 reading of July and expectations for increase to 83.
Spanish industrial output continued to decline in the year to July, albeit at a slower pace, with a decrease of 1.4% recorded<http://www.ine.es/en/daco/daco42/daco422/ipi0713_en.pdf>. While still a poor number, the result was an improvement on the 2.2% annualised decline previously reported in June.
UK industrial output missed expectations in July with flat growth recorded<http://www.ons.gov.uk/ons/dcp171778_326323.pdf> during the month. The result was below the upwardly-revised 1.3% rate of June and expectations for an increase of 0.1% with a sharp decline in utilities and mining output offset by small gains in manufacturing and energy production.
Reflecting strengthening economic data of late, UK economic growth is likely to have expanded 0.9% in the three months to August, at least according to estimates from the NIESR<http://niesr.ac.uk/sites/default/files/gdp0913press.pdf>, up from the 0.7% rate forecast in the three months to July.
UK house prices grew at a slower-than-expected pace in August with the Halifax house price index<http://www.lloydsbankinggroup.com/media1/press_releases/2013_press_releases/halifax/060913_HPI.asp> rising 0.4%. Despite slowing from the 0.9% rate of June and missing expectations for an increase of 0.7%, with weaker data rolling off the series, the average annualised increase over the past 3 months rose to +5.4% from +4.6% in July.
A weak set of numbers out of Switzerland on Friday with CPI and industrial orders both disappointing on the downside. Consumer prices slipped 0.1% in August, below the flat reading expected by the markets, with the year-on-year rate holding steady at 0% for a second-consecutive month. It was a similar story on the industrial front with new orders falling by 4.2% in the June quarter, a result that was far weaker than the 0.5% rise recorded in the 3 months to March.
The Day Ahead (All times AEST)
The ASX 200 look set to start the week modestly in the black with SPI futures pointing to a rise of 12pts on the open. Despite the change of government over the weekend, given the likely composition of the Senate and the fact the lower house outcome has been priced in for weeks now, it’s unlikely that we’ll see much, if any, of a relief rally once the physical market get underway at 10am this morning. If anything, the index is likely to take its cues from Chinese markets when they open at 11.30am following the release of reasonable trade data over the weekend.
The AUDUSD has gapped higher on the resumption of trade this morning with the pair currently buying .9205. Given Friday’s mediocre NFP report and the fact we have major Chinese data released in the next two days, something that has tended to beat expectations over the past two months, it’s likely that it’ll remain well supported over the course of today’s session. Should we see a break of resistance at .9220-.9232, it’s likely that the pair will move back towards strong selling resistance below the .9300 level. While we don’t imagine that it’ll be far, should the pair slip today, any move below .9200 will be met with solid buying interest.
Domestic data releases today include the ANZ job ads survey for August along with housing finance data for July. Both releases are scheduled for 11.30am.
Regional data releases today include Chinese CPI and PPI figures for August along with revised Q2 GDP, consumer confidence, new bank lending and current account figures from Japan.
A calendar chock-full of second-tier data arrives this evening with US consumer credit, Eurozone Sentix survey, Canada building permits, Taiwanese trade, Greece industrial production along with Swiss unemployment and retail sales all scheduled for release.