Daily Market Update 2 October 2013 - Shutdown slide stymied, risk back on
Unfortunately there has been no resolution to the US budget impasse<http://www.washingtonpost.com/politics/government-shutdown-begins-senate-expected-to-reject-latest-house-proposal/2013/10/01/ef464556-2a88-11e3-97a3-ff2758228523_story.html> overnight with non-essential government services closed, or operating on reduced capacity, until an agreement can be reached between the Democrat-controlled Senate and Republican-controlled House. Given the situation remains fluid, you can keep up to date on the latest headlines by following our twitter feed by clicking here<https://twitter.com/David_Scutt>.
US manufacturing activity expanded at the fastest pace since April 2011 in September with the ISM PMI gauge<http://www.ism.ws/ismreport/mfgrob.cfm> rising to 56.2. The reading was higher than both the 55.7 level of August and expectations for a decline to 55.0 with improvements in employment, production, inventories and prices largely behind the strong result. While that reading showed improvement, the separate Markit PMI gauge fell backwards in September with a reading of 52.8 recorded<http://www.markiteconomics.com/Survey/PressRelease.mvc/e32b050a3ef7439f9f5065117489c887>. While in line with the flash estimate released late last month, the reading was below the 53.1 figure previously reported in August.
Canadian manufacturing activity expanded strongly in September with the RBC PMI gauge<http://www.markiteconomics.com/Survey/PressRelease.mvc/a0a3d73cc2eb485a880bd6e8dd34ee90> rising to 54.2. The reading was higher than the 52.1 figure previously seen in August with gains in new orders and exports doing most of the heavy lifting.
As confirmed by the flash reading released late last month, Eurozone manufacturing activity expanded at a slightly slower pace during September with Markit’s PMI gauge<http://www.markiteconomics.com/Survey/PressRelease.mvc/07bfd9a03db44521b2f336a8ee269f97> falling to 51.1. While still in expansionary territory, the result was down on the two-year peak of 51.3 previously seen in August. Of the ‘Big 4’ nations, Germany<http://www.markiteconomics.com/Survey/PressRelease.mvc/ed3b0e0776c54cc0b5a86ea9e3897bd8>, France<http://www.markiteconomics.com/Survey/PressRelease.mvc/bcabcc955bfa461a83ed327ac0259fad>, Italy<http://www.markiteconomics.com/Survey/PressRelease.mvc/bacb95f5e70f409d90a9a8413e08515a> and Spain<http://www.markiteconomics.com/Survey/PressRelease.mvc/eb8be26380694f7cacb6019448823c93>, only France recorded an improvement, up from 49.7 to 49.8, while Germany, Italy and Spain saw the speed of expansion slow from levels seen in August.
Eurozone unemployment held steady in August with a reading of 12.0% reported<http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-01102013-AP/EN/3-01102013-AP-EN.PDF>. The result beat expectations for an increase to 12.1% and matched the downwardly-revised 12.0% rate previously recorded in July.
German unemployment<https://www.destatis.de/EN/PressServices/Press/pr/2013/10/PE13_329_132.html;jsessionid=3EEDB40F9EABFB73550214924313DC48.cae4> rose unexpectedly in September with an increase of 25k reported. The figure was well below the 5k decrease that had been expected by the markets and left the official rate 0.1% higher at 6.9%. Doubling up on the bad news, Italian unemployment<http://www.istat.it/en/archive/99746> hit a fresh record high in August with a rate of 12.2% reported. The reading was above the upwardly-revised 12.1% figure of July and expectations for a reading of 12.0% with youth unemployment, those persons 15-24 years old, surging to 40.1%, the highest level seen since records began in 1977.
UK manufacturing activity expanded at a slightly slower pace in September with Markit’s PMI gauge<http://www.markiteconomics.com/Survey/PressRelease.mvc/010b50c61df54276b9d87c8bf7c7dcd3> falling to 56.7. The reading was below the downwardly-revised 57.1 reading of August and expectations from an increase to 57.3.
The Day Ahead (All times AEST)
The ASX looks set to resume its uptrend this morning with SPI futures pointing to a rise of 23pts on the open. While the gold, materials and energy sectors are likely to come under some pressure following falls in commodities overnight, it, along with the domestic data due out at 11.30am, shouldn’t prevent the index from snapping its 2-day losing streak.
Having stormed to as high as .9435 following the release of the RBA monetary policy statement yesterday afternoon, the AUDUSD has eased back overnight with the pair currently buying .9390. While headlines surrounding the US budget negotiations will trump all if-and-when they arrive, the domestic data calendar will be influential in the interim with the figures, particularly the building approvals release, likely to set the tone for the Aussie over the course of Asian trade. Support is found at .9380, .9355 and again below .9310 with resistance kicking in at .9400, .9435 and .9457.
Domestic data releases today include building approvals and trade figures for August. In what will make for an interesting few minutes for economists and investors alike, both releases are scheduled to arrive at 11.30am.
The European Central Bank will announce their October monetary policy decision at 9.45pm this evening. While it’s unlikely that the governing council will adjust interest rates at this meeting, all attention will be President Mario Draghi’s press conference at 10.30pm to see whether or not a new round of long-term refinancing operations, or LTRO for short, will be offered to help boost liquidity within the financial system.
Aside from the ECB which will dominate proceedings, other data releases this evening include the ADP national employment report, ISM New York index and MBA mortgage market index in the States, Eurozone producer prices, UK construction PMI along with Spanish unemployment.