Daily Market Update 29 January 2014 - Quiet day expected, FOMC on radar
US consumer confidence edged higher in January with the Conference Board index rising to 80.7. The figure beat forecasts for an increase to 78 and was above the downwardly-revised 77.5 reading seen in December with the index now at highs not seen since August 2013.
US durable goods orders fell heavily in December with a decline of 4.3% recorded. The figure was well below the downwardly-revised 2.6% increase of November and forecasts for an increase of 1.8% and was the sharpest month-on-month contraction seen since July 2013. Excluding transportation orders, lumpy items that can skew the headline figure, core orders also contracted, falling 1.6% against expectations for an increase of 0.5%.
US urban house prices rose more-than-expected in November with the S&P/Caseshiller house price index jumping by a further 0.88%. The figure was above expectations for a rise of 0.8% but below the 1.05% increase previously seen in October. The result left the index some 13.71% higher than the same month a year ago, a result that was slightly ahead of the 13.61% pace of October.
Manufacturing activity across Mid-Atlantic States expanded at a slightly slower pace in January with the Richmond Fed index falling to +12 during the month. The figure was fractionally below expectations for a reading of +13, subsequently the same reading that had been previously recorded in December.
UK economic growth decelerated fractionally in the three months to December with an increase of 0.7% reported. The figure was in line with expectations but below the 0.8% pace recorded in the third quarter with the year-on-year rate jumping to 2.8%, the fastest annual growth rate seen since Q1 2008.
French consumer confidence edged higher in January with INSEE reporting an increase to 86. The figure was higher than the 85 reading of December, subsequently the same level forecast by economists, and is the highest the index has been since October 2013.
Italian consumer confidence pushed higher in January with ISTAT reporting an increase to 98.0. The reading was above the upwardly-revised 96.4 print of December and forecasts for an improvement to 96.7 with the index now at the highest level seen since November last year. While consumer confidence rose, it certainly wasn’t because of a strengthening in labour market conditions with wages growth remaining static in December. The figure left the annualised growth rate at 1.3%, the same level seen in November.
German import prices held steady in December. Despite being below both the 0.1% rise of November and expectations for an increase of 0.2%, with stronger data rolling off the data series, the year-on-year rate improved to -2.3% from -2.9% in November.
Disappointing data out of Spain overnight with mortgage lending and approvals falling heavily in the year to November. Total lending fell by 26.9%, far worse than the 15.5% contraction recorded in October, with the total number of approvals coming in at -27.4%, down on the -23.2% pace seen previously.
The Reserve Bank of India (RBI) shocked markets late yesterday afternoon with the Board lifting their key repo rate by 0.25% to 8.0% during their January meeting. To read the full statement explaining the decision, click here.
The Day Ahead (All times AEDT)
The ASX 200 looks set for a flat open today with SPI futures pointing to a rise of 2pts on the open. Given it is the session before the FOMC policy decision due out tomorrow morning, we expect a quiet day of trade with the index likely to play close attention to the movements in Chinese equity markets later in the session.
Having briefly popped above the .8800 level in early North American trade, the AUDUSD has eased lower this morning with the pair currently fetching .8775. With little on the data front and with the FOMC policy decision just around the corner, it wouldn’t surprise to see the pair ease moderately lower today on expectations for further asset purchase tapering from the Fed. Support is found at .8761, .8739 and again at .8726 with resistance kicking in at .8800 and again at .8823.
Domestic releases today include the Westpac leading index and skilled vacancies survey for December. On the regional front we’ll also receive industrial production and current account figures from South Korea.
The US Federal Reserve FOMC conclude their January monetary policy meeting overnight with the subsequent policy statement due out at 6am tomorrow morning. Keeping with tradition, the Fed are expected to ‘taper’ monthly asset purchases by a further $10b, an outcome that will leave their monthly purchase total at $65b per month.
While the FOMC meeting will dominate all others, markets will also have to digest the latest MBA mortgage market index from the US, German consumer confidence, Eurozone M3 growth, the Nationwide house price index from the UK, Spanish retail sales and Italian business confidence figures this evening.
The Reserve Bank of New Zealand announce their January monetary policy decision at 7am tomorrow morning.