Daily Market Update 21 November 2013 - Overnight rally turns to Ashes.

Daily Market Update 21 November 2013 - Overnight rally turns to Ashes.

The minutes of the FOMC’s October 29-30 policy meeting were released overnight with the tone, although dated, seeing risk assets fall modestly on the back of renewed tapering concerns. In the document committee members noted that the effects of the government shutdown would be ‘temporary and limited’ and that ‘there had been little change in the economic outlook since the September meeting’. Despite this mantra, it was interesting to see some members suggest that ‘if economic conditions warranted, the Committee could decide to slow the pace of purchases at one of its next few meetings’. If you would like to read the document in full, please click here.


US retail sales rose strongly in October with an increase of 0.4% reported. The figure was four-times stronger than the 0.1% rise expected by the markets and came on the back of an upwardly-revised flat reading in September. Excluding auto-related purchases, lumpy items that can augment the headline figure, ‘core’ sales rose by a smaller 0.2%, double expectations.


US CPI continued to decline in October with a slide of 0.1% reported. The reading was below expectations for flat growth during the month and left the annualised rate at 1.0%, the lowest level seen since October 2009. Excluding food and fuel, volatile items that can skew the data, ‘core’ prices edged up by 0.1%, a figure that was in line with expectations. The increase left the year-on-year rate unchanged at 1.7%.


US existing home sales fell more-than-expected during October with an annualised rate of 5.12m reported. The figure was 3.2% below the 5.29m pace of September and missed expectations for a decline of 2.9%. Interestingly, the pace of sales has now fallen for two consecutive months, something that hasn’t been seen since April-May 2011.


US mortgage demand continued to fall last week with the MBA mortgage market index slipping by a further 2.3%. The decline was faster than the 1.8% contraction recorded in the previous corresponding week with a 5.8% rise in loans for new purchases offset by a sharp 6.5% decline in refinancing. From a week earlier, the average 30-year mortgage rate was 2bps higher at 4.46%.


US business inventories rose strongly in September with an increase of 0.6% recorded. The figure doubled expectations for a rise of 0.3% and came on the back of an upwardly-revised 0.4% increase in August.


As has been the case now for the entirety of Mark Carney’s tenure, the Bank of England MPC voted unanimously to keep their key bank rate and asset purchase program steady at 0.5% and £375b respectively at their November policy meeting. To read the document in full, please click here.


German producer price inflation continued to ease in October with fall of -0.2% reported. The figure was below the flat reading expected by economists and left the year-on-year rate down a further 0.2% at -0.7%.


The Day Ahead (All times AEDT)

Having broken its long-term uptrend yesterday only to fight back into the close, the ASX 200 looks set to come under renewed pressure today, largely on the back of technical-related selling, with SPI futures pointing to a decline of 6pts on the open. While the index will start off weaker, should it manage to recover back to flat or even higher by the end of today’s session, it will be a bullish signal for those looking for the traditional ‘Santa Claus’ rally into the Christmas break. On the flipside, should the index finish with a loss today, it suggests that we’ll see renewed weakness arise in the period ahead.


The AUDUSD has taken a bath overnight with a combination of tapering fears, squaring of positions before Glenn Stevens’ speech tonight and talk of negative interest rates from the ECB seeing the Aussie drop more than one cent before stabilising into the close. Given all of the above mentioned factors it’s clear the pair is a sell-on-rallies prospect today, even with the release of Chinese manufacturing PMI, until we get further news to suggest otherwise. Support starts at .9311-16, .9303 and again at .9277 with resistance kicking in at .9353, .9380, .9427 and again at .9448.


RBA Governor Glenn Stevens speaks this evening at 8.05pm. Given the title of his speech, ‘The Australian Dollar: 30 years of floating’, along with recent attempts to jawbone the currency lower, this address is likely to deliver significant amounts of market volatility in the height of European trade.


China will once again be the centre of attention in Asia today with the release of HSBC’s flash manufacturing PMI gauge for November. Having printed at 50.9 in October, markets are looking for a small decline to 50.8 when the data hits at 12.45pm. Alongside that data, markets will also have to digest weekly foreign bond and stock flows from Japan along with the ANZ job ads survey for October in New Zealand.


A hectic economic calendar this evening with plenty to keep investors busy on both sides of the Atlantic. In Europe we’ll receive flash services and manufacturing PMI readings from the Eurozone, Germany and France, Eurozone consumer confidence, Italian wage inflation along with public sector borrowing and industrial orders from the UK. Across the pond markets will also receive jobless claims, flash manufacturing PMI along with the Philadelphia Fed manufacturing survey in the States. Rounding off the session, well also hear from ECB President Mario Draghi along with US FOMC members Bullard, Lacker and Powell.


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