Daily Market Update 31 January 2014 - A slow day expected on the markets

Daily Market Update 31 January 2014 - A slow day expected on the markets

US economic growth slowed in Q4 2013 with an annualised rate of 3.2% recorded. The reading was in line with market expectations but below the 4.1% annualised rate seen in Q3 2013. While a small deceleration, something that was no doubt impacted by the government shutdown in October, there were some promising signs within the report with household consumption, the largest component within the US economy, rising at an annualised rate of +3.3%, the fastest acceleration seen since Q4 2010.


Core PCE price inflation, the Federal Reserve’s preferred measure of price pressures, slid in the fourth quarter of 2013 with an annual increase of 1.1% recorded. While in line with forecasts, the rate was below the 1.4% clip recorded in Q3 and well below the 2% level targeted by the FOMC.


US initial jobless claims rose sharply last week with a figure of 348k reported. The reading was 19k higher than the upwardly-revised 329k figure of the previous corresponding week and well above expectations for an increase to 330k.While first-time claimants rose, continuing claims slid, falling to 2.991m from 3.007m seen previously.


US pending home sales plunged in December with a decline of 8.7% recorded. The figure was well below both the downwardly-revised 0.3% decline of November and expectations for a further contraction of 0.3% with the month-on-month percentage decline the largest recorded since May 2010. The bearish outcome, undoubtedly impacted by weather, saw the annual rate of sales slow to -6.1%, the largest annualised decline recorded since April 2011.


Eurozone consumer confidence continued to improve throughout January with the EC index printing at -11.7. The reading was in line with the initial estimates released earlier in the month but ahead of the -13.5 figure previously seen in December.


German unemployment held steady at 6.8% in January. The figure was below the 6.9% rate expected by economists and was in line with the downwardly-revised 6.8% rate of December. In total unemployment fell by 28k over the month, a reading that was stronger than both the 19k decline of December and expectations for a drop of 5k.


German consumer price inflation fell more-than-expected in January with a decline of 0.6% reported. The figure was below both the +0.4% reading of December and forecasts for a decline of -0.4% with the year-on-year pace slowing to +1.3%, the lowest level seen since October 2013.


Spanish economic growth accelerated in the fourth quarter of 2013 with an increase of 0.3% recorded. The reading was in line with market expectations but stronger than the 0.1% expansion recorded in Q3 with the annualised contraction improving to -0.1% from -1.1% seen previously.


The Day Ahead (All times AEDT)

China, Hong Kong & Singapore are off today for Chinese New Year Celebrations.


The ASX 200 looks set to bounce heading into month-end with SPI futures pointing to a rise of 18pts on the open. While it is month-end, a day where we have all learnt to expect the unexpected, given the rally offshore and the fact most of Asia are off today, it is likely that the index will rally on the open before flat lining in the latter parts of trade.


The AUDUSD bounced modestly overnight with improved risk sentiment and weakish data from the US propelling the Aussie to high of .8801 before easing modestly into the close. With market participation down sharply thanks to Chinese New Year celebrations, we expect the pair will range trade between .8760 and .8826 during the Asian session.


Abenomics will be in focus today with the release of manufacturing PMI, consumer price inflation, unemployment, housing starts and construction orders in Japan. Elsewhere we’ll also receive trade figures from New Zealand along with private sector credit and Q4 PPI figures from Australia.


A busy data calendar to end off the week with numerous releases scheduled on both sides of the Atlantic. Starting in Europe markets will receive CPI figures for the Eurozone and Spain, retail sales data from Germany and Greece, PPI readings from France and Italy, Eurozone unemployment along with French consumer spending. Across in North America the calendar is equally as busy with consumer confidence, PCE price inflation, Chicago PMI along with personal income and spending figures released in the US while in Canada we’ll also receive GDP data for November. 


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