Daily Market Update 19 February 2014 - US economy continues to splutter
Manufacturing activity across New York State expanded at a slower-than-expected pace in February with the Empire State index falling to 4.48. The reading was well below the 12.51 figure of January and expectations for a decline to 8.50 with the fall the steepest month-on-month decline seen since August 2012. In total 5 of 9 survey components fell, the largest coming from new orders and prices paid, although there was some good news on the employment front with employee numbers and the average work week both holding in expansionary territory.
US homebuilder confidence plummeted in February with the NAHB index sliding to 46. The reading was well below the 56 figure of January, subsequently the same level forecast by economists, with the 10 point drop the largest month-on-month decline seen since the survey began in 2004. As you would expect with such an outcome, all survey components, along with all regional responses, fell heavily over the month.
German investor expectations soured unexpectedly in February with the closely-watched ZEW survey falling to 55.7. The reading was below both the 61.7 figure of January and expectations for a decline to 61.5 with the index now sitting at the lowest level seen since November last year. While the outlook deteriorated, it was a different story for near-term conditions with the current situation index surging to 50.0. The figure was well ahead of the 41.2 reading of January and expectations for an increase to 44.0 with the index now sitting at the highest level seen since August 2011. Adding to that result, having risen by the same margin in the previous month, the combined 17.6 point increase was the largest 2-month gain recorded since November 2010.
UK consumer prices fell heavily in January with a decline of 0.6% reported. The figure was slightly below expectations for a decrease of 0.5% with the annualised increase falling to a 50-month low of +1.9%. Excluding volatile items that can skew the headline result, ‘core’ CPI fell even harder, printing at an annualised rate of +1.6% from +1.7% in December. While consumer prices continued to ease, showing that upstream price pressures are building, albeit from very low levels, producer price inflation rose by 0.3%, above the flat reading expected by markets, although the annual rate continued to slide with a decline of 0.1% to +0.9% recorded.
UK house prices continued to push higher in the year to December with the ONS survey rising by +5.5%. While above the +5.4% pace of November, the rate was below the 6.0% increase that had been expected by the markets.
The Day Ahead (All times AEDT)
The ASX 200 looks set to continue its push higher this morning with SPI futures pointing to a rise of 6pts on the open. As was demonstrated yesterday, with the bar for earnings season now high, unless we get a raft of corporate beats, accompanied by further gains across regional markets, the likelihood of profit-taking after a stellar run of late remains high.
Another busy session on the domestic earnings front with Fortescue Metals Group, Seek, Suncorp-Metway, Woodside Petroleum and Brambles all scheduled to report.
Having threatened to break through .9000 briefly overnight, the AUDUSD has recovered ground late in North American trade, thanks largely to softer data out of the States, with the pair currently fetching .9032. While ongoing data weakness in the US is acting as a deterrent to push it lower, with the pair continuing to trade poorly above the .9000 level, coupled with likely soft domestic data today, we suspect that Aussie will continue to range trade throughout today’s Asian session. Support is found at .9032, .9021 and .9002 with resistance located at .9046, .9060 and again at .9081.
Australian data releases today include the Conference Board leading index for December, skilled vacancies data for January along with the Q4 wage price index. While all warrant attention, it’s likely that markets will centre their attention on the WPI when it is released at 11.30am this morning. Economists expect wages to have grown 0.6% over the quarter with the annual increase expected to fall to +2.5%. Should that indeed eventuate, it will mean that wages growth is now running at the slowest pace seen since records began in 1998.
The Bank of Japan release their latest monthly economic report for February at 4pm this afternoon.
The economic calendar heats up this evening with central bank activity, along with major data from the US and Europe, set to dictate direction. In Europe we’ll receive the minutes of the Bank of England’s February 5-6 MPC meeting along with UK unemployment. Across in the States the big releases keep coming with housing starts, building permits, producer price inflation and MBA mortgage market index all schedule for release. Rounding off the session we’ll also receive minutes of the FOMC’s Jan 28-29 meeting along with speeches from FOMC committee members Lockhart and Bullard.