Daily Market Update 30 September 2013 - Political uncertainty likely to weigh

Daily Market Update 30 September 2013 - Political uncertainty likely to weigh

Core PCE price inflation, the preferred measure used by the FOMC when determining price pressures, pushed higher in August with a rise of 0.2% recorded. While above the 0.1% increase expected by the markets, the result left the annualised rate some 0.8% below the Fed’s 2% target at 1.2%.  


US household consumption rose strongly in August with an increase of 0.3% recorded. While in line with expectations, the result was stronger than the upwardly-revised 0.2% increase of June and was the fourth-consecutive month that consumption had improved. Perhaps explaining the jump in spending, personal incomes also surged, rising 0.4%, with the increase the largest recorded since February of this year.


US consumer confidence rose more-than-expected in September with the final read of the University of Michigan/Thomson Reuters survey rising to 77.5. While above the 76.8 preliminary reading released earlier in the month, the result was below the 78.0 figure expected by the markets. As was the case with the headline figure, both current conditions and expectations rose fractionally with scores of 92.6 (+0.8pts) and 67.8 (+0.6pts) recorded. 


Eurozone economic sentiment rose to the highest level seen since August 2011 during September with the European Commission index rising to 96.9. The figure was higher than both the upwardly-revised 95.3 figure of August and expectations for an increase to 96.0. Mirroring the perceived improvement in the economy, consumer sentiment also improved during the month, rising to -14.9 from -15.6, the highest level recorded since July 2011.


French GDP rose by 0.5% in Q2, unchanged from the preliminary estimate released in early September. Elsewhere consumer spending fell heavily in August with a decline of 0.4% reported. While ahead of estimates for a contraction of 0.5%, the reading completely offset the 0.4% increase previously recorded in July.


German consumer prices held steady in September with flat growth recorded during the month. The result was in line with market expectations and left the year-on-year rate steady at +1.4%. Providing an indication of the divergent economic performance of the two nations at present, Spanish consumer prices rose by just 0.5% in the year to September, a result that was below both the 1.6% rate of August and expectations for a decline to +0.9%.


Italian business confidence rose strongly in September with an increase to 96.6 recorded. The result was higher than the upwardly-revised 93.4 reading of August, subsequently the same figure that had been expected by the markets for September, and was the highest level seen since July 2011.


Spanish retail sales contracted further in the year to August with a decline of 4.5% reported. The result was well below the upwardly-revised 3.4% fall of July and was the lowest reading seen since June.


UK house prices continued to recover in September with the Nationwide house price index increasing by 0.9%. The result was well above both the 0.7% rise of August and expectations for an increase of 0.5% and left the year-on-year rate some 1.5% higher at +5.0%.


The Day Ahead (All times AEST)

The ASX 200 looks set to pull back from fresh 5-year peaks this morning with SPI futures pointing to a fall of 13pts on the open. While the index managed to brush aside negative leads from offshore last week, given unresolved political concerns over the US and Italy, coupled with the likelihood of profit-taking following a strong quarter of gains, it appears likely that the index will finish in the red in the absence of any positive political announcement, particularly from the US.

Having slipped on Friday evening, the AUDUSD has opened the week marginally firmer with the pair currently buying .9313. With no major data scheduled locally, the moves today will likely be driven by offshore influences, namely Chinese manufacturing PMI data and political news on the US government budget negotiations. Support is found at .9315, .9300 and .9291 with resistance kicking in at .9335, .9370 and above .9400.

After watching the tumbleweeds roll past last week, the domestic economic calendar springs back to life this morning with the release of consumer credit figures for August and the TD-MI inflation gauge for September. Given the debate over the local housing market at present, expect the credit figures, particularly the housing component, to garner most attention. The inflation gauge will be released at 10.30am with the credit data following soon after at 11.30am.

Abenomics will be in focus today with the release of industrial output, manufacturing PMI, construction orders and housing starts in Japan. Elsewhere we’ll receive Chinese manufacturing PMI from HSBC, always a market-mover despite the flash figure having already been released, along with the NBNZ business survey from New Zealand.

Data releases this evening include inflation figures from the Eurozone and Italy, retail sales from Germany and Greece, producer prices from Italy and France, credit figures from the Bank of England along with Chicago PMI, Dallas Fed manufacturing index and the Midwest manufacturing survey in the US.


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