Daily Market Update 13 September 2013 - Risk ‘tapered’ before FOMC next week

Daily Market Update 13 September 2013 - Risk ‘tapered’ before FOMC next week 

US jobless claims fell to the lowest level since early April 2006 last week with a decline of 31k reported<http://www.dol.gov/opa/media/press/eta/ui/current.htm>. The 292k figure was well below both the 323k pace of the previous corresponding week and expectations for an increase to 330k with the 4-week moving average, a less volatile read on labour market conditions, falling to 321k, the lowest level seen since October 2007. While on the surface it was an incredibly strong result, the Labour Department reported that ‘computer upgrades’ in two States skewed the data leading to the unexpectedly-large decline.


US export prices fell sharply in August with a decrease of 0.5% reported<http://www.bls.gov/news.release/pdf/ximpim.pdf>. The figure was well below expectations for an increase of 0.1% and came on the back of a 0.1% decline previously seen in July. While export prices fell, import prices held steady, a result that was below expectations for a rise of 0.4%, with July’s 0.2% increase revised down to +0.1%.

The US Federal budget deficit widened in August with a figure of $147.9bn reported. The result was higher than the $97.6bn figure of July but below the $191bn deficit recorded in August 2012.


Canadian new home prices inched higher in July with an increase of 0.2% recorded. The result doubled market expectations and matched the 0.2% rise previously seen in June.


Eurozone industrial output fell heavily in July with a decrease of 1.5% reported<http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-12092013-AP/EN/4-12092013-AP-EN.PDF>. The figure was below both the downwardly-revised 0.6% rise of June and expectations for an increase of 0.1% with the year-on-year contraction accelerating to -2.1%. Making the headline number even worse, all components fell over the month, something that indicated broad-based weakness, with the worst performances coming from energy, capital goods and durable consumer goods output.


Mirroring the performance of the regional gauge, Italian industrial output fell heavily in July with a decrease of 1.1% recorded<http://www.istat.it/en/archive/98592>. The figure was below the 0.2% increase of June and expectations for a rise of 0.3% and left the annualised contraction some 2.2% lower than June at -4.3%.


Further benign CPI readings out of Europe overnight with annualised figures for Italy<http://www.istat.it/en/archive/98614>, Spain<http://www.ine.es/en/daco/daco42/daco421/ipc0813_en.pdf> and France<http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20130912> remaining well below acceptable levels in August. Italian CPI rose by 1.2%, up 0.1% from July, while inflation in Spain fell to a 4-month low of just 1.5%. Making it a hat-trick of soft numbers, French CPI fell 0.2% to 1%, the lowest level seen since May this year.


Greek unemployment<http://www.statistics.gr/portal/page/portal/ESYE/BUCKET/A0101/PressReleases/A0101_SJO02_DT_MM_06_2013_01_F_EN.pdf> rose to another fresh all-time high in June with a rate of 27.9% reported. The figure was higher than both the 27.6% figure of May and 24.6% level of June last year with youth unemployment, those aged 15-24 years, coming in at 58.8%.



ECB President Mario Draghi spoke in Latvia overnight, basically welcoming the nation to the Euro before they adopt the common currency next year. While his speech had no implications for monetary policy, for those interested in what he had to say, you can read his speech in full by clicking here<http://www.ecb.europa.eu/press/key/date/2013/html/sp130912_1.en.html>.


Indian industrial output rose strongly in July with an increase of 2.6% reported. The result completely offset the 2.2% decline previously seen in June with manufacturing output, up 3.0% on year, largely responsible for the robust monthly performance.



Indian CPI fell fractionally in August with the year-on-year rate declining to 9.52%. The result was below both the 9.64% rate of July and expectations for a fall to 9.55%.

The Day Ahead (All times AEST)


The ASX 200 looks set to follow Wall St into the red this morning with SPI futures pointing to a decline of 9pts on the open. While at this point the losses look modest, given materials and financial stocks were amongst the worst performers offshore, it will be interesting to see whether losses on our market will be steeper than what SPI futures currently suggest. This answer, as is usually the case on a low-volume, low-news flow Friday, will likely be determined by the performance of the Chinese equities once they open at 11.30am.


The AUDUSD has held in surprisingly well despite weak domestic data at home, strong US data overnight and sharp declines in spot gold with the pair bouncing from a low of .9230 before rallying into the close. While an amazing performance given the factors working against it, with the recent uptrend broken and the FOMC meeting next week, it’s likely that the pair will come under renewed pressure over the course of the Asian session. Strong support is found between .9230-43 and again at .9220 with resistance kicking in at .9274, .9300 and .9320.


Regional releases today include business PMI and ANZ business confidence from New Zealand, retail sales and unemployment from Singapore along with revised industrial production data in Japan.


A big data calendar in the States this evening with August retail sales and the Uni of Michigan/Thomson Reuters consumer survey for September the undisputed headline acts. Elsewhere markets will receive producer price inflation and business inventories from the US, trade and Q2 employment figures from the Eurozone, capacity utilisation from Canada along with Swiss producer prices.


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