Daily Market Update 18 November 2013 - A renewed focus on China today
Having disappointed markets earlier in the week following the conclusion of the Third Plenum, the Chinese government finally put some substance behind their statements on Friday with a raft of sweeping reforms announced after the close of Mainland markets. Of these the abolishment of their three-decade long one-child policy was the undisputed headline act with a raft of market reforms, along with the establishment of an intellectual property court, other notable changes announced. To read about the reforms in detail, please click here.
US industrial production eased back in October after surging in September with a month-on-month decline of 0.1% reported. While below the 0.2% increase that had been eyed by markets, the result may merely have been ‘payback’ following an upwardly-revised 0.7% increase in September. Helping to further offset the weak headline figure, manufacturing production increased 0.3% after rising 0.1% in September with utilities and mining, having risen strongly previously, declining by 1.1% and 1.6% respectively.
US import prices fell more-than-expected in October with a decline of 0.7% reported. The figure was below the downwardly-revised 0.1% increase of September and expectations for a decline of 0.5% and left the annualised drop at a 5-month low of -2.0%.
Manufacturing activity in New York and surrounds contracted unexpectedly in November with the New York Fed’s Empire State index slipping to -2.21. The figure was well below the 1.52 reading of October and expectations for an increase to 5.00 and was the lowest level seen since January of this year. Declines were recorded across all sub-sectors with the worst falls coming from new orders, shipments, unfilled orders and average work week.
In what was the only strong US data print released during Friday’s session, wholesale inventories and sales rose strongly in September. Inventories increased by 0.4%, in line with expectations, with the result coming on the back of a 0.8% lift in August. Showing that inventory build-up is being outpaced by demand, sales increased at an even quicker pace of 0.6%. The figure doubled expectations for an increase of 0.3% and followed a downwardly-revised 0.4% rise in August.
Confirming that price pressures across the Eurozone continue to decline, inflation was confirmed at -0.1% in October. The result left the annualised rate unchanged from the flash estimate of +0.7%, the lowest level seen since November 2009.
Canadian existing home sales fell sharply in October with a decline of 3.2% reported. The decrease was four-times greater than the 0.8% rise of September and was the sharpest month-on-month decline recorded since August 2012.
The Day Ahead (All times AEDT)
The ASX 200 looks set to continue where it left off on Friday today with investors likely to cheer Chinese reforms announced over the weekend. While SPI futures only has the index rising a benign 8pts, given China’s importance to Australia’s economy, the gains seen on SPI are likely to be amplified on the underlying index. While we’ll start off with modest gains, whether we can build upon then during the day will largely be determined by the performance of Chinese equity markets when they open at 12.30pm.
The AUDUSD has opened slightly higher than where it closed off Friday evening with the pair currently buying .9378. With no data domestically to speak of, the movements of the USDJPY, a pair it has tended to have an inverse correlation with of late, along with the performance of Chinese equity markets, will likely drive direction today. Support starts at .9362-68, .9334 and at .9303 with resistance kicking in at .9387, .9410 and again at .9417.
While there is nothing on the domestic front, regional data releases today include China house price growth, Japanese housing loans, New Zealand Performance of Services Index along with South Korean producer price inflation.
A quiet economic calendar to start the week with Eurozone trade and current account figures, along with the NAHB home builder survey in the States, the only releases of note.