Daily Market Update 20 September 2013 - FOMC exuberance fades fast

Daily Market Update 20 September 2013 - FOMC exuberance fades fast

US initial jobless claims rose less-than-expected last week with an increase to 309k recorded<http://www.dol.gov/opa/media/press/eta/ui/current.htm>. While above the 294k pace of the previous corresponding week, something that was caused by computer upgrades across 2 States, the reading was below market expectations for a rise to 330k. While seemingly a ‘beat’, it was revealed that backlogs resulting from the upgrades were yet to be fully input, a factor that helps explain the surprisingly-strong result.


US existing home sales rose to a fresh six-year high in August with a year-on-year increase of 5.48m reported<http://www.realtor.org/news-releases/2013/09/august-existing-home-sales-rise-limited-inventory-continues-to-push-prices>. The 1.7% increase was ahead of expectations for a rate of 5.25m and was the highest level seen since February 2007.


Manufacturing activity across Philadelphia and surrounds accelerated sharply during September with the Philadelphia Fed business index<http://www.phil.frb.org/research-and-data/regional-economy/business-outlook-survey/2013/bos0913.cfm> rising to 22.3. The reading was well ahead of the 9.3 reading of August and expectations for an increase to 10.0 and was the highest level seen since March 2011. As you would expect with the rise in the headline rate, all of major components rose over the month with the most impressive performances coming from the outlook and new orders subindices.


The US leading index, a gauge on likely economic activity over the next six months, rose strongly in August with an increase of 0.7% reported<http://www.conference-board.org/data/bcicountry.cfm?cid=1>. The figure was ahead of the downwardly-revised 0.5% rise of July and expectations for an increase of 0.6% and was the strongest monthly gain seen since April of this year.


UK retail sales fell dramatically in August with a decline of 0.9% reported<http://www.ons.gov.uk/ons/dcp171778_327646.pdf>. The figure was well below both the 1.1% increase of July and expectations for a rise of 0.4% and was the largest monthly percentage fall since October 2012. Excluding fuel, a lumpy item that can easily distort the underlying trend, the news was even worse with a decline of 1% reported. While a disappointing outcome, particularly given the stellar data seen of late, a 2.7% fall in food sales was largely to blame for the underwhelming monthly result.


UK manufacturing orders hit a fresh six-year high in September with the CBI survey<http://www.cbi.org.uk/media-centre/press-releases/2013/09/manufacturing-recovery-continues-to-strengthen-cbi-survey/> rising to +9 for the month. The figure was above the 0 reading of August and expectations for an increase to +2 with output expectations, a forward indicator for future order growth, rising 8pts to +35, the highest level seen since March 1995.


Greek unemployment<http://www.statistics.gr/portal/page/portal/ESYE/BUCKET/A0101/PressReleases/A0101_SJO01_DT_QQ_02_2013_01_F_EN.pdf> fell modestly in Q2, declining to 27.1% from the all-time record high of 27.4% struck in Q1. While a welcome improvement, given the quarterly data is not seasonally adjusted, it’s likely that unemployment will once again push higher at the conclusion of the summer tourist season.


Taking a leaf out of the FOMC’s book, the Swiss National Bank held monetary policy steady<http://www.snb.ch/en/mmr/reference/pre_20130919/source/pre_20130919.en.pdf> in September with their key target rate and EURCHF peg remaining at 0-0.25% and 1.20 respectively. Reflecting better prospects for both the Swiss, European and global economies alike, the Bank upped their 2013 GDP forecast to 1.5-2%, ahead of the 1-1.5% forecast previously offered, while deflation, predicted to come in at -0.2% in 2013, is likely to reverse course next year with inflation of 0.3% expected.


The Day Ahead (All times AEST)


The ASX 200 looks set to follow Wall Street into the red this morning with SPI futures pointing to a fall of 14pts on the open. While it is likely that we’ll start off weaker, with base and precious metals holding firm and minute volumes expected, it wouldn’t surprise to see the index push back towards flat by the conclusion of today’s session.


Having looked toppy for large parts of yesterday’s session, the AUDUSD has given back some of the FOMC-induced euphoric gains overnight with the pair falling to a low of .9428 before bouncing modestly into the close. With many participants fatigued and with very little on the economic calendar to speak of, we expect a quite day of trade with the pair likely to operate within a relatively thin band between .9400-.9490. Support starts at .9428, .9400 and .937 with resistance kicking in at .9450, .9490 and .9530.


Japanese foreign stock and bond purchases from last week, along with New Zealand migration figures for August, will be released during today’s trading session. As was the case yesterday, Bank of Japan Governor Kuroda is also scheduled to speak.


Data releases this evening include Eurozone consumer confidence, Canadian CPI, UK public sector borrowing along with Italian industrial orders and sales. In what make for some interesting viewing following their shock monetary policy (non)-decision of Wednesday, FOMC members George, Tarullo, Bullard and Kocherlakota will also be in action.



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