Daily Market Update 27 September 2013 - ASX to close at fresh multi-year highs?
US initial jobless claims continued to slide last week with a fall to 305k reported<http://www.dol.gov/opa/media/press/eta/ui/current.htm>. The result was 5k lower than the previous corresponding week and was well below market expectations for an increase to 325k. While a good outcome, making it even better, backlogs in California and Nevada, something that had skewed the series previously, were cleared during the week making the result even stronger than what the headline number would suggest.
US GDP<http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm> expanded by 2.5% in the year to June, unchanged from the preliminary figure released earlier in the month. While below expectations for an increase of 2.6%, the figure was still the fastest expansion recorded since Q3 2012. While largely expected, perhaps of more importance given the ongoing tapering debate, core PCE inflation, the Fed’s preferred measure of gauging price pressures, rose by just 0.6%, well below the 2% level targeted by the FOMC.
US pending home sales fell more-than-expected during August with a decline of 1.6% reported<http://www.realtor.org/news-releases/2013/09/pending-home-sales-decline-in-august>. The result was below both the downwardly-revised 1.4% contraction of July and expectations for a decrease of 1%.
Manufacturing activity in Kansas City and surrounds continued to grow in September, albeit at a slower pace, with the regional Fed index<http://www.kc.frb.org/publicat/research/indicatorsdata/mfg/pdf/2013Sep26mfg.pdf> sliding to +4. The reading was well below the +21 figure previously seen in August with 11 of the survey’s 14 subindices retracing during the month.
UK GDP<http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/stb-quarterly-national-accounts--q2-2013.html> grew 0.7% in Q2, unchanged from the second estimate released earlier in the month. Despite the unchanged quarterly rate, downward revisions to prior data saw the year-on-year rate slip -0.2% to +1.3%.
Eurozone private lending continued to slide in August with an annualised contraction of 2% recorded<http://www.ecb.europa.eu/press/pdf/md/md1308.pdf>. While in line with market expectations, the reading was weaker than the 1.9% decline of July and was the weakest level seen since records began in 1992.
French consumer confidence rose fractionally in September with INSEE reporting<http://www.insee.fr/en/themes/info-rapide.asp?id=20&date=20130926> an increase to 85. The figure was in line with expectations and was an improvement on the 84 reading achieved in August.
Italian retail sales continued to slide in July with a decrease of 0.3% reported<http://www.istat.it/en/archive/99456>. While worse than the 0.2% contraction recorded in June, with ‘’weaker’ data rolling off the data series, the year-on-year decline improved to -0.9% from -3% in June.
The Day Ahead (All times AEST)
The ASX 200 looks set to continue its winning streak this morning with SPI futures pointing to a rise of 10pts on the open. While this will see the index finish at levels not seen since June 2008 if held into the close, given political uncertainties that exist in both the US and Italy, coupled with recent history, the index has closed the opposite direction to which it travelled in the quarter on 78% of occasions since Q2 2011, there is more than reasonable chance that we’ll see profit-taking occur as we head towards the close. Still, even if this does eventuate, the index is still likely to record its largest quarterly percentage increase since Q3 2009 today.
Having peaked above .9400 early in the European session, the AUDUSD has continued to slide lower overnight with reasonable US economic data, coupled with hopes that we may see political bipartisanship on the US budget and debt ceiling negotiations, helping the USD to regain its mojo in the latter parts of trade. Given that it’s quarter-end, a notoriously difficult period to predict market movements, those participating in the pair today should expect the unexpected. Support is found at .9340, .9318 and .9298 with resistance kicking in at .9360, .9380 and again above .9400
While the domestic calendar remains bare, regional data releases today include CPI from Japan along with the ANZ business confidence survey in New Zealand.
A busy data calendar to end off the week with a raft of second-tier data scheduled on both sides of the Atlantic. In the US we’ll receive consumption and incomes data, PCE price inflation along with the final read of consumer sentiment from the University of Michigan. Across the pond we’ll also receive consumer and economic sentiment for the Eurozone, CPI data in Germany and Spain, the final read on Q2 GDP and consumer spending figures from France, Italian business confidence, Spanish retail sales, Greek producer prices along with the Nationwide house price from the UK. As has been the case all week, the FOMC calendar remains fully-booked with Evans, Rosengren and Dudley all scheduled to speak.