Daily Market Update 9 December 2013 - US, China data blow estimates away

Daily Market Update 9 December 2013 - US, China data blow estimates away

As indicated by other data releases earlier in the week, the US labour market continued to strengthen in November with non-farm payrolls surging by an additional 203k. The figure was higher than both the downwardly-revised 200k increase of October and expectations for a rise of 185k and was the single-largest monthly increase since August of this year. Adding to the robust headline number, the unemployment rate plummeted to 7.0%, well below the 7.3% rate of October and expectations for a decline to 7.2%, with the rate now sitting at levels not seen since November 2008. While in the past the unemployment drop was fuelled by lower labour market participation, adding strength to data, the percentage of working-age population looking for work increased by 0.2% to 63.0%, the first time that this has been seen since June this year. As you would expect with strengthening labour market conditions, the average work week and average hourly earnings both improved during the month, rising 0.1 hours and 0.2% respectively, while the underemployment rate, a figure that incorporates people in the labour market who would like to be working more, falling by 0.6% to 13.2%. While overall the data was very strong, if you were looking for any weakness within the report, average weekly earnings growth softened, rising 2.0% on year from 2.2% in October.


Perhaps explained by strengthening labour market conditions, US consumer confidence bounced back strongly in December with the preliminary University of Michigan/Thomson Reuters consumer survey surging to 82.5. The reading was well above the 75.1 figure of November and expectations for an increase to 76.0 and was the single-largest monthly advance since May 2013. Both the current conditions and expectations rose strongly over the month with the former surging 9.9pts to 97.9, the largest month-on-month increase since October 2006.  


US consumer credit growth surged in October with the Federal Reserve reporting a rise of $18.186b. The figure was above the upwardly-revised $16.293b increase of September and expectations for growth of $14.5b and was the largest monthly increase since May 2013. As is usually the case, non-revolving credit, namely student and auto loans, did most of the heavy lifting with an increase of $13.9b reported.


Core PCE price inflation, the Federal Reserve’s preferred measure of gauging inflationary pressures, remained weak in October with an increase of 0.1% recorded. The figure was in line with expectations and matched the same figure reported in September and left the year-on-year rate lower at +1.1%, nearly half the level targeted by the Fed.


Personal income growth in the US fell for the first time since January this year in October with a decrease of 0.1% reported. The unusual decrease, at least in terms of recent data, was well below the 0.5% increase of September and expectations for a rise of 0.3%. While it was weak, spending growth accelerated during the month with an increase of 0.3% reported. The reading was ahead of expectations for a rise of 0.2% and was the sixth-consecutive monthly increase recorded since May 2013. As you’d expect with spending growth accelerating while incomes went backwards, the national savings ratio fell back to 4.8% from 5.2% in September.


China’s trade surplus swelled during November with an increase to $33.8b reported. The reading was higher than the upwardly-revised $31.11b figure of October and expectations for a decline to $21.2b and was the largest surplus recorded since January 2009. While a bullish headline number, all of the increase came from an acceleration in exports, +12.7% on year compared to +5.6% previously, while import growth slowed, falling to +5.3% from +7.6% in October. 


Canada’s unemployment rate held steady for a second-consecutive month in November with a rate of 6.9% reported. Overall 21.6k additional jobs were created over the month, up on expectations for an increase of 12k, with part-time positions responsible for most of the increase with a rise of 20k reported.


Germany factory orders missed to the downside in October with a decrease of 2.2% reported. The figure was below the downwardly-revised 3.1% increase of September and expectations for a decline of 1% and was the third month in four that a decrease was recorded. After adjustments for work days, the decline left the annual increase at +1.9%, well below the 7.8% increase previously seen in September.


The Day Ahead (All times AEDT)

The ASX 200 looks set to recovery ground this morning with SPI futures pointing to a rise of 25pts on the open. Given this figure doesn’t incorporate the Chinese trade numbers released over the weekend, particularly news of a 14.8% rise in iron ore imports over the month of November, it wouldn’t surprise to see the index outperform what SPI currently suggests led by gains in the materials sector.


Boosted firstly by gains in US equities and secondly by Chinese trade data released over the weekend, the AUDUSD has opened the new week moderately higher with the pair currently fetching .9127. Despite the impressive move, given that it was largely fuelled by short-covering rather than fundamentals, we expect that pair will come under renewed selling pressure today as traders look to sell into the strength in anticipation of further declines ahead. Support is found at .9118-22, .9097 and .9078-72 with resistance kicking in at .9141, .9153 and again at .9168.


The ANZ job ads survey for November will be released at 11.30am. On the regional front, we’ll also receive CPI and PPI figures from China, trade and Q3 GDP (Final) from Japan along with house price data and Q3 manufacturing activity from New Zealand.


A euro-centric data calendar arrives this evening with trade and industrial production figures from Germany, GDP and CPI from Greece, French manufacturing sentiment, Sentix survey from the Eurozone along with Canadian housing starts all scheduled for release. On the policy front, FOMC members Lacker and Bullard speak early tomorrow morning – speeches that will inevitably draw more scrutiny than normal in light of recent economic data.


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