Daily Market Update 28 February 2014 - S&P 500 hits new highs, ASX 200 to follow?

Daily Market Update 28 February 2014 - S&P 500 hits new highs, ASX 200 to follow?

Janet Yellen made her delayed testimony to the US Senate Banking Committee overnight with her speech largely sticking to the same script offered to the House Financial Services Committee two weeks prior. If there was anything new in the testimony is was on the weather, somewhat ironic given it was adverse weather that delayed her testimony in the first place, with the recently appointed Fed Chair stating that ‘a number of data releases have pointed to softer spending than many analysts had expected. Part of that softness may reflect adverse weather conditions, but at this point, it's difficult to discern exactly how much. In the weeks and months ahead, my colleagues and I will be attentive to signals that indicate whether the recovery is progressing in line with our earlier expectations’. Exciting a few who are looking for the Fed to ease back on tapering in the meetings ahead, she also reaffirmed that if the weakness was not solely weather-related, that ‘asset purchases are not a predefined course’. 


US durable goods orders slipped for a second-consecutive month during January with a decline of 1.0% reported. The reading was an improvement on the downwardly-revised 5.3% fall of January and ahead of expectations for a decline of -1.7%. While weak, core orders, that which excludes lumpy transportation items that can augment the headline rate, bounced unexpectedly, rising 1.1% following a -1.9% contraction in December. The figure was stronger than the 0.3% decline forecast by economists and with the increase the largest month-on-month advance seen since May 2013.


US initial jobless claims continued to rise last week with an increase to 348k reported. The print was 14k higher than the rate of the previous corresponding week and well above the 335k reading expected by the markets.


Manufacturing activity across Kansas City and surrounds continued to expand in February with the Kansas City Fed manufacturing index coming in at +4. While below the +5 figure seen in January, the reading was above estimates for a decline to +2.


Eurozone consumer confidence was confirmed at -12.7 in February, the same figure seen in the preliminary estimate. While below the 33-month high of -11.7 achieved in January, the gauge remains well above the -15.4 series average recorded over the past decade.


German unemployment fell for a third-straight month in February with a decline of 14k recorded. The figure bettered forecasts for a drop of 10k and left the unemployment rate steady at 6.8%.


German consumer price inflation logged its largest month-on-month increase in a year in February with a rise of 0.5% reported. While largely offsetting the 0.6% fall in January, the reading was below the 0.6% increase that had been expected by the markets. With the monthly figure missing on the downside, the annual rate rose by +1.2%, below the +1.3% pace expected, with inflation now running at the slowest pace seen since April 2013.


German import prices continued to slide in January, declining 0.1% following flat growth in December. While slightly above the -0.2% fall expected, the annual rate held at -2.3% for a second-consecutive month.


Spanish GDP grew less-than-expected in the three months to December, expanding 0.2% against the preliminary estimate of +0.3%. The revision left the year on-year rate at -0.2%, down on the -0.1% contraction seen previously.


Spanish house prices continued to slide in Q4 2013 with a decline of 1.8% reported. While below the 0.4% contraction recorded in Q3, the annual rate of decline improved to -4.0% from -4.5% seen prior.


French consumer confidence fell in February with a decline to 85 reported. The figure was below the 86 print of January, subsequently the same level expected by economists.


Italian business sentiment pushed higher in February with an increase to 99.1 reported. The reading was above the 97.7 figure of January and expectations for an increase to 98.0 with sentiment now sitting at the highest level seen since July 2011.



The Day Ahead (All times AEDT)

Having tried and failed over the past two weeks, the ASX 200 looks set to have another crack at closing at a fresh 6-year high today with SPI futures pointing to a rise of 24pts on the open. Whether we get there or not will be touch and go with month-end flows, BHP going ex-div on Monday and the seemingly-random moves in Chinese equity markets all set to play their part in determining whether we get there by the close of trade today. However, with the S&P 500 closing at an all-time high overnight in the States, the impetus has been provided for a fresh run higher today.


Harvey Norman, Virgin Australia, James Hardie and Woolworths headline the domestic earnings calendar today.


Pushing aside yesterday’s weak capex report, the AUDUSD has pushed higher overnight with gains in US equity markets and continued hopes that the Fed will ‘taper their taper’ given recent data weakness seeing the pair hit a high of .8971 before easing modestly into the close. Given Asia’s propensity to ‘buy the dip’, something we’ve done in 16 of 18 sessions since the RBA turned neutral, there’s every likelihood that the Aussie will remain bid over the course of today’s trading session. Support is found at .8938 and .8904 with resistance kicking in at between .8971-76, .9000 and again above .9023


Australian private sector credit figures for January will be released at 11.30am. Markets expect an increase of +0.5%, a figure that will see the year-on-year expansion increase to +4.1%.


Abenomics will be back on focus today with the release of CPI, manufacturing PMI, retail sales, industrial production, unemployment, construction order and housing starts from Japan. Elsewhere we’ll also receive industrial production and business sentiment figures from South Korea along with M3 growth, building permits and the ANZ business survey from New Zealand.


Data releases this evening include Q4 GDP, Chicago PMI, pending home sales and the Uni of Michigan/Thomson Reuters consumer survey in the US, unemployment and CPI figures from the Eurozone, GDP figures from India and Canada, PPI and consumer spending from France, retail sales from Germany and Greece, Spanish CPI, Italian unemployment along with the Nationwide house price index from the UK. On the policy front we’ll also hear from FOMC members Kocherlakota, Evans, Plosser, Stein and Fisher along with Bank of England Governor Mark Carney.


Chinese manufacturing PMI for February will be released at 12pm Saturday. Is activity contracting as seen in the HSBC gauge? Was the timing of the Lunar New Year responsible for some of the unexpectedly-strong data released for January? Hopefully the answer to these questions will be found come the end of this weekend.


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