Daily Market Update 12 September 2013 - ASX 200 set to scale fresh multi-year peaks
UK unemployment fell unexpectedly in July with a rate of 7 .7% reported<http://www.ons.gov.uk/ons/dcp171778_325094.pdf>. The result beat expectations for a reading of 7.8% and was the lowest level seen since October 2012. Continuing the good news seen there, the claimant count, a measure of people claiming unemployment benefits, continued to slide during August with a decrease of 32.6k recorded. While below the upwardly-revised 36.3k fall seen in July, the result was ahead of expectations for a decline of 22k. Despite those strong figures, there was some bad news for those people already in work with annualised earnings growth in the three months to July rising by a paltry 1.1%. Although only fractionally below the 1.2% increase expected, the figure was well below both the 2.2% rate of June and the current inflation rate of 2.8%.
US mortgage applications plunged to the lowest level seen since November 2008 last week with the MBA mortgage market index falling 13.5%. The decline was the largest seen since October 2010 with refinancing, off a whopping 20.2%, the chief catalyst behind the ugly result. Underlining the reason behind the fall, tapering expectations, the average 30-year mortgage rate surged 7bps to 4.80%, matching the 2013 high set two weeks prior.
US wholesale inventories and sales fell short<http://www2.census.gov/wholesale/pdf/mwts/currentwhl.pdf> of expectations in July with an increase in both of 0.1%. The results were well below expectations for respective growth of 0.4% and 0.3% respectively.
Unchanged from the preliminary estimate released late last month, German CPI<https://www.destatis.de/EN/PressServices/Press/pr/2013/09/PE13_303_611.html;jsessionid=F52F556444370F9121C884BA48562CE3.cae1> held steady in August with the annualised rate remaining at 1.5%.
Confirming the data from last week, French non-farm payrolls<http://www.insee.fr/en/themes/info-rapide.asp?id=30&date=20130911> fell by 0.2% in the three months to June.
As expected, the Reserve Bank of New Zealand left their overnight cash rate steady at 2.50% this morning. To read the accompanying monetary policy statement, click here<http://www.rbnz.govt.nz/monetary_policy/monetary_policy_statement/>.
The Day Ahead (All times AEST)
The ASX 200 looks set to blast above its 2013 high of 5249.6 this morning with SPI futures pointing to a rise of 12pts on the open. While there are risks associated with the unemployment release at 11.30am, with markets likely to adopt a ‘good news is good, bad news is good’ type mentality given its implications for monetary policy, its highly likely that we’ll be able to hold the initial gains into the closing bell.
The AUDUSD continued to rally overnight with the pair hitting .9338, the highest level seen since June 26, before easing into the close. While technically and fundamentally it looks rock solid at present, all attention today will be on the labour force statistics at 11.30am with a strong result likely to send the pair back towards the .9400 level while a weak outcome will see a big unwind of recent short-term long positioning. Support starts at .9320, .9280 and .9260 with resistance kicking in at .9338 and again at .9390.
Australian labour force data for August will be released at 11.30am. Economists are looking for an increase in employment of 10k with the unemployment rate expected to rise to a 4-year high of 5.8%. While the seasonally-adjusted data will no doubt print well away from expectations, something that will cause short-term market volatility, given it is far too unreliable on a month-to-month basis, we believe the trend series should be used to gauge the true state of the labour market.
Regional data releases today include foreign stock and bond movements, along with machine orders, from Japan while the Bank of Korea will announce their September monetary policy decision.
Economic data releases this evening include jobless claims, Federal budget figures and import/export prices from the US, industrial output figures from the Eurozone, Italy and India, CPI figures from France, Italy and Spain, German wholesale price inflation along with Greek unemployment. On the monetary policy front, ECB president Mario Draghi will speak from Latvia while William Dudley, President of the New York Federal Reserve, will be in action in Paris.