Daily Market Update 23 September 2013 - Will Chinese PMI save the day?

Daily Market Update 23 September 2013 - Will Chinese PMI save the day?

After a self-imposed blackout before their September policy meeting, ’Fed speak’ the nickname given to speeches and comments delivered by members of the US Federal Reserve’s FOMC, resumed on Friday with divergent views on the future path of policy, something that saw so many get the September tapering call wrong, causing all bar treasuries to give back most of the gains achieved following the September policy decision. James Bullard, St Louis Fed President, stated that it was a close call not to taper in September with weaker economic data the chief catalyst behind their final decision. While he went on to say that it made sense to taper bond buys right now because of recent economic data, he also noted that it was entirely possible that they could taper as early as their October meeting. From one extreme to another, Ester George, the Kansas City Fed President and only voting FOMC member to dissent against the policy action in September, stated that their actions created confusion and disconnect within markets and brought into question the reliability and credibility on the future path of policy. She also noted that the delay could see markets misconstrue their economic outlook as being weaker, something that we tend to agree with.




Angela Merkel and her CDU party have won the German election held yesterday. To keep up to date with the result as it unfolds you can either follow us live on Twitter<https://twitter.com/David_Scutt> or click here<http://www.spiegel.de/international/germany/live-blog-the-german-federal-elections-in-real-time-on-spiegel-international-a-923371.html> for up to the minute coverage from the Spiegel Online.




Eurozone consumer confidence rose fractionally in September with the EC reporting<http://ec.europa.eu/economy_finance/db_indicators/surveys/documents/2013/fcci_2013_09_en.pdf> an increase to -14.9. While below expectations for a reading of -14.5, the result left overall confidence at levels not seen since July 2011.




Canadian consumer prices held steady<http://www.statcan.gc.ca/daily-quotidien/130920/dq130920a-eng.pdf> in August, a result that was below expectations for a rise of 0.1%, and left the year-on-year increase 0.2% lower at 1.1%. Excluding volatile items such as food and fuel, core CPI rose by 0.2%, in line with expectations, with the annualised rate ticking down to +1.3%.




UK public sector borrowing narrowed in August compared to a year earlier with the ONS reporting<http://www.ons.gov.uk/ons/dcp171778_326621.pdf> deficit of £13.157b. The result was below the £14.41b deficit recorded in August 2012 and expectations for a decrease in borrowing to £13.5b.




Italian industrial orders slipped during July with a decrease of 0.7% reported<http://www.istat.it/en/archive/99165>. While a weak result, the reading was an improvement on the -2.5% decline recorded in June and left the year-on-year contraction at -2.2%, above the -4.2% rate of June. While orders improved, sale disappointed badly with a fall of 0.8% recorded. The result was below the 0.6% rise of June and left the annualised decline sharply lower at -3.6%.



The Day Ahead (All times AEST)


Japanese markets will be closed today for the ‘Autumn Equinox’ Holiday


The ASX 200 looks set to start the week modestly in the red with SPI futures pointing to a fall of 23pts on the open. While SPI suggests we’ll be set to match the losses seen on Wall St, it’s likely that we’ll retrace most of the losses this morning with traders likely to speculate on another stronger Chinese manufacturing PMI print arriving at 11.45am. Should we see a figure above the 50.1 reading of August, expect the index to push modestly into the black on the back of gains in the materials sector. On the contrary, should we get a reading at-or-below Augusts’ figure, it’s likely that losses will accelerate in the back-half of the session.




Having closed near its session lows on Friday, the AUDUSD has continued to decline this morning with the pair currently trading at .9361. While renewed chatter about near-term FOMC tapering is behind the ongoing decline, with major Chinese data due out later in the session, something that had tended to beat of late, it’s likely that we’ll see the pair recover ground later this morning on expectations of another stronger-than-expected outcome. Support is found at .9350 and again between .9327-33 with resistance kicking in at .9380, .9400 and .9425.




Chinese manufacturing activity will be back in focus this morning with the release of the flash HSBC manufacturing PMI gauge for September. Markets will be looking for an improvement on the 50.1 reading of August when it hits the screens at 11.45am.




PMI gauges dominate the data calendar this evening with manufacturing and services readings out in the Eurozone, Germany and France while manufacturing data for the US is also scheduled for release. Elsewhere we’ll also receive Italian wage inflation figure for August.



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