Daily Market Update 28 November 2013 - CAPEX holds the key...

Daily Market Update 28 November 2013 - CAPEX holds the key...

US durable goods orders continued to disappoint in October with a fall of 0.2% reported. While in line with expectations, the reading was well below the upwardly-revised 4.1% increase of September. Excluding transportation and aircraft orders, lumpy items that can augment the headline figure, the news was little better with a decline of 1.2% recorded. The figure was well below expectations for an increase of 0.8% and was the third month in four that a contraction had occurred.


US initial jobless claims continued to slide last week with a reading of 316k reported. The figure was below both the upwardly-revised 326k pace of the previous corresponding week and expectations for an increase to 330k and was the lowest level seen since late September.


Contradicting the reading from the Conference Board released yesterday, US consumer confidence rebounded more-than-first-thought in November with the final reading of the University of Michigan/Thomson Reuters survey rising to 75.1. The figure was above the 72 preliminary reading released earlier in the month and the 73.2 print of September with a 4.5pt jump in expectations, along with a 0.8pt rise in conditions, entirely responsible for unexpectedly-strong increase.


Manufacturing activity in Chicago and surrounds expanded strongly in November with the ISM’s Chicago PMI gauge coming in at 63.0. While down on the 65.9 reading seen in October, the highest level seen since March 2011, the figure was above expectations for a fall to 60.0. Increases in prices paid, inventories, employment and supplier deliveries were offset by weaker readings for production, new orders, and backlogs. 


US mortgage demand slid for a fourth-consecutive week, its longest streak of declines since early June to late July, with the MBA mortgage market index falling 0.3%. A 0.2% drop in new purchases offset a 0.1% bounce in refinancing with the average 30-year mortgage rate rising 2bps to 4.48%.


The US leading index, a gauge of likely economic activity over the next 3-6 months, rose for a fourth-consecutive month in October, the longest ‘up’ streak since September 2012 to February 2013, with a rise of 0.2% reported. While down on the upwardly-revised 0.9% increase of September, the reading beat expectations for a flat figure for the month.


German consumer morale surged in November with the GfK consumer climate survey soaring to 7.4. The figure was above the upwardly-revised 7.1 reading of October, also the same level forecast by economists, and was the highest level seen since September 2007. While confidence in Germany hit multi-year highs, perhaps demonstrating the divergent economic performance between the two nations of late, French morale soured over the same time period with INSEE’s household survey declining to 84. The reading was below the 85 figure of October and expectations for a steady reading in November.


UK Q3 GDP was confirmed at +0.8% overnight with the year-on-year rate also remaining unchanged at +1.5%. Larger-than-expected gains in consumption and gross fixed capital formation were able to offset weaker readings for exports and business investment.


UK retail turnover rose fractionally in November with the CBI distributive trades survey falling to +1. The reading was below both the +2 figure of October and expectations for an increase to +10 and was the lowest level seen since June this year. While the sales figure was fractionally weaker, seasonally-adjusted volumes and orders, -9 and +1 respectively, were well down on the -2 and +12 readings previously seen in October.


Spanish retail sales slid unexpectedly in the year to October with a fall of 0.6% reported. While below the downwardly-revised 2.1% annual pace of September, the figure remains well above the 2013 low of -10.7% struck in March this year. After adjustments for work days and seasonality, the reading was slightly higher at -0.5%.


The Day Ahead (All times AEDT)

US markets will be closed this evening for Thanksgiving.


The ASX 200 looks set to open flat after yesterday’s decline despite SPI futures pointing to a rise of 12pts on the open. While there is plenty of chatter that the lower Aussie Dollar will boost company earnings, something that will eventually underpin the index moving forward, with international investors continuing to switch funds away from Asia ex-Japan in favour of Europe and the US, any further sharp declines in the currency will likely result in further losses for the index. In light of this, should we get a weak CAPEX report today, it wouldn’t surprise to see the index slip into the red despite the fact it will heighten expectations of further rate cuts from the RBA.


The AUDUSD has opened below the .9100 level for the first time since September 3 this morning with the pair currently buying .9079. While the overnight declines were largely a result of stronger-than-expected US data, the Q3 CAPEX report released at 11.30am today will be the driving force behind the movements of the pair today with a weak result likely to see the Aussie slip below .9000 while a strong reading will result in a short squeeze, albeit a temporary one. Support starts at .9063, .9038, .9014 and at .9000 with resistance kicking in at .9089, .9098 and again at .9135.


In what will likely be a major market-mover, Australian Q3 capital expenditure data will be released at 11.30am this morning. While initial attention will be on the headline figure, something that is forecast to print at -1.2% following a 4% increase in Q2, the equipment, plant and machinery figure, something that feeds into GDP, along with the 4th estimate of 2013/14 spend, will dominate market movements in the period following its release. The former is expected to come in flat while the 3rd estimate of 2013/14 CAPEX spend was approximately $159.2b. If both miss it will be ‘Australia bearish’ while if both beat it’ll be regarded as ‘Australia bullish’. If they happen to print mixed the CAPEX estimate will overrule all others. While it will be lost in the churn of the CAPEX report, HIA new home sales for October will be released at 11am this morning. Following a chunky 6.4% rise in September, it will be interesting to see whether this momentum can be maintained into the fourth quarter.


Regional data releases today include Japanese retail sales, ANZ business survey from New Zealand along with the South Korean current account for October.


Data releases tonight include business and consumer sentiment, along with M3 growth figures for the Eurozone, GDP, CPI and house price index from Spain, CPI, unemployment and import prices from Germany along with economic and business confidence in Italy.


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