Daily Market Update 14 October 2013 - No news is bad news?
Despite markets premeditating that a US budget deal would be struck, there has been little progress made over the weekend with Senate Democrats and Republicans continuing to negotiate as at the time of writing. With the government shutdown now in its thirteenth day and with the debt ceiling only days away from being hit, any failure to come up with a solution in the near-term has the potential to see markets unwind some or all of the gains recorded on Thursday and Friday of last week.
US consumer confidence slid to a nine-month low in October with the University of Michigan/Thomson Reuters survey coming in at 75.2. The reading was below both the 77.5 figure of September and expectations for a decline to 76.0 with a surprise 0.2pt rise in current conditions unable to offset a larger 3.9pt decline in expectations.
Keeping with Commonwealth tradition, Canadian unemployment<http://www.statcan.gc.ca/daily-quotidien/131011/dq131011a-eng.pdf> fell unexpectedly in September with the official rate sliding to 6.9%. The figure was below the 7.1% rate of August, subsequently the same outcome that had been expected by economists, and was the lowest level seen since December 2008. Just as the case with Australia earlier in the week, a sharp fall in participation, down 0.2% to 66.4%, was the chief catalyst behind the decline despite the economy adding an additional 11.9k workers over the course of the month.
A mixed Chinese trade performance in the year to September with an unexpected fall in exports offset by a stronger-than-forecast rise in imports. Having risen by 7.2% in the year to August, exports fell by 0.3%, a result that was well below the 6% increase that had been expected by economists. While that was a disappointment, there was better news on the import front, particularly if you’re looking for signs of economic rebalancing, with imports rising by 7.4% from a year earlier. The increase was higher than both the 7% rate of August and the same figure expected by the markets and left the monthly trade surplus sharply lower at $15.2b. From an Australian perspective, it’s also worthwhile noting that China’s iron ore imports rose by 8% to 74.58m tonnes in September, something that will likely be replicated in our September trade figures when they are released next month.
In an outcome best explained by seasonality more than anything else, consumer price inflation in Europe diverged strongly in September with prices in Italy and Spain<http://www.ine.es/en/daco/daco42/daco421/ipc0913_en.pdf> rising strongly while remaining flat in Germany<https://www.destatis.de/EN/PressServices/Press/pr/2013/10/PE13_340_611.html;jsessionid=89D89CB226B13857B88F9C88A51933B4.cae4>. Italy saw an increase of 1.8%, the highest monthly increase recorded since March this year, while Spanish prices rose by 0.8%, four-times the pace expected. Despite the monthly divergence, demonstrating the relative-strength of all three economies, Germany’s annualised rate held steady for a third month at 1.6% while Italy and Spain, in a far more weakened state, saw their annual rates decline to just 0.9% and 0.5%.
The Day Ahead (All times AEST)
The ASX 200 looks set to open up strongly this morning, at least according to pricing derived on Friday evening, with SPI futures pointing to a gain of 33pts on the open. Despite what SPI suggests, given the sharp unwind that we’ve seen on the AUDJPY this morning, the best early gauge on likely investor sentiment in the session ahead, it appears likely that the index will do well to open in the black in the absence of any positive news on the US budget negotiations currently underway in Washington.
The AUDUSD has gapped lower this morning with the pair currently off 40 pips at .9415. While we will get important data releases from both home and abroad today, as has been the case over the past couple of weeks, they will likely be trumped by the ongoing news flow from Washington. Support is found at .9410, .9385 and at .9350 with resistance kicking in at .9442, .9463 and again at .9484.
Australian housing finance data for August will be released later today. Given it was during this month that the RBA last cut official interest rates, it’ll be interesting to see how this prints, particularly the investment housing figure, once the numbers hit the screens at 11.30am.
Chinese CPI and PPI figures for September will be released this afternoon at 12.30pm. Elsewhere we’ll also get the REINZ house price index from New Zealand.
A quiet economic calendar this evening with Eurozone industrial production the only release of note.