Daily Market Update 10 December 2013 - Leaving it late for today’s main event
Providing no real clues as to the timetable for tapering asset purchases, three Fed officials were in action overnight with Richmond Fed President Jeffery Lacker speaking in North Carolina, St Louis Fed President James Bullard in St Louis and Dallas Fed President Richard Fisher from Chicago. Lacker, a noted policy hawk, hinted that there would be a discussion on tapering at their December 17-18 even though, in his view at least, GDP would be ‘just a little above 2% next year’ with no imminent acceleration in employment growth likely. Bullard, regarded as less of a hawk than Lacker, stated that the likelihood of tapering had risen following last Friday’s job report and hinted that the Fed could start small in light of below-target inflation levels at present. Last but not least, Richard Fisher, voting member in 2014 and well-known policy hawk, stated that risks in continuing asset purchases now far outweighed any purported benefits. Unsurprisingly, he went on to add that the FOMC should begin tapering at the earliest opportunity.
German industrial production contracted unexpectedly in October with a decline of -1.2% reported. The reading was below both the upwardly-revised 0.7% decline of September and expectations for an increase of 0.7% and was the fourth month in six that a decrease was recorded. Making the headline figure even worse, all components contracted during the month with the largest declines coming from energy (-1.9%) and construction (-1.7%). Conflicting with recent PMI readings, manufacturing and mining production also slipped, falling 1.1% after contracting 1.0% in September.
Germany’s trade surplus narrowed slightly in October with a decrease to €17.9b reported. The figure was below the downwardly-revised €20.3b surplus of September and forecasts for a decline to €18.3b with exports and imports, +0.2% and +2.9% respectively, coming in ahead of market expectations.
European investor sentiment soured unexpectedly in December with the Sentix index falling to 8.0. The reading was below the 9.3 figure of November and expectations for an increase to 10.0 with a decline in the current situation gauge, down to -6.3 from -3.3 in November, offsetting an increase in expectations which improved to 23.3.
French manufacturing sentiment continued to push higher in November with the Bank of France index rising to 101. The reading was above both the upwardly-revised 100 figure of October and expectations for a decline to 98 with sharp improvements in the production outlook and order growth able to offset declines in activity and aggregate demand.
More worrying signs out of Greece overnight with deflationary forces gaining momentum in November. From a year earlier prices fell by 2.9%, well below both the -1.9% pace seen in October and expectations for an increase to -1.7%, with the decline the sharpest seen since harmonised Euro-area records began in 1996. Adding to that worrying news, GDP was confirmed at -3.0% in the year to September with the nominal figure, that which has not been adjusted for price movements, revised down to -5.9% from -5.8% prior.
Canadian housing starts fell more-than-expected in November with an annualised pace of 192.2k reported. The figure was below the downwardly-revised 198.2k rate of October and expectations for a decrease to 195k.
The Day Ahead (All times AEDT)
The ASX 200 looks set to add to losses this morning with SPI futures pointing to a decline of 2pts on the open. With volumes thinning out and our radar off of late, we’re reluctant to make any firm calls in light of the lacklustre lead from Wall St. While the price action of late has been bearish, if there is to be a bounce today, it’ll have to come from short-covering before the release of the Chinese data at 4.30pm.
An uneventful session for the AUDUSD overnight with the pair reverting to following the gold price having mirrored equities on Friday. Once the NAB business survey has been cleared at 11.30am, we wouldn’t be surprised to see the pair obtain a bid tone as traders position themselves before the Chinese data released later in the session. While most will be expecting another ‘beat’, with the speculative community still net short, risks heading into the event appear to be evenly balanced. Support is located at .9097 and at .9072 with resistance kicking in at .9141-53 and again at .9168.
Australian lending finance commitments for October along with the NAB business survey for November will be released this morning at 11.30am. Both will be closely scrutinised, particularly the investment lending and business conditions components.
The Chinese data deluge continues once again today with the release of retail sales, urban fixed asset investment and industrial production figures for November. If recent history holds true, expect most-if-not-all to beat when they are released at 4.30pm. While the Chinese data will dominate later on, earlier in the session we’ll also receive M3 monetary growth, machine tool orders and consumer confidence from Japan. On the policy front, FOMC member Richard Fisher is also scheduled to speak on the ‘economy and monetary policy’ from 10.30am.
Industrial activity will be in focus this evening with industrial production figures from the UK, Italy, France and Greece all scheduled for released. Elsewhere we’ll also receive the final Q3 GDP print from Italy, wholesale inventories and sales data from the States along with trade figures and latest GDP estimate from the NIESR in the UK. While there are no FOMC members scheduled to speak this evening, ECB President Mario Draghi will be in action in Rome from 11pm.