Daily Market Update 27 March 2014 - AUD, the little currency that could!
US durable goods orders rose strongly in February, snapping two months of declines seen previously, with an increase of 2.2% reported<http://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf>. The reading was ahead of expectations for an increase of 0.8% and was the fastest month-on-month increase seen since November last year. While the headline number was strong, ‘core’ orders, that which excludes lumpy transportation items that can augment the overall figure, was not nearly as robust with an increase of 0.2% reported. The reading was lower than both the 0.3% rise expected and downwardly-revised 0.9% figure of February.
US service sector activity expanded at a faster-than-expected pace in March with Makit’s ‘flash’ PMI gauge<http://www.markiteconomics.com/Survey/PressRelease.mvc/a655b90f6ba1492d8fbea2d7ada81977> rising to 55.5. The reading was higher than the 53.3 figure of February, expectations for a rise to 54.0 and the 53.2 print recorded in the same month a year ago.
US mortgage demand fell for a fifth week in seven last week with the MBA mortgage market index slipping by a further 3.5%. The decline, the sharpest experienced since mid-February, was entirely due to a slump in refinancing with a 7.7% drop reported. Perhaps underlining the reason for the decline, the average 30-year mortgage rate rose sharply, jumping 6bps to 4.56%.
German consumer confidence held steady heading into April with the forward-looking GfK consumer climate index<http://www.gfk.com/Documents/Press-Releases/2014/20140326_GfK-Consumer-Climate-March-2014_efin.pdf> remaining at 8.5. Consumers reported that they were less likely to save and more likely to spend on the back of improved business expectations, offsetting declines in the outlook for incomes and overall prices.
Italian retail sales continued to disappoint in January with flat growth recorded<http://www.istat.it/en/archive/116509> during the month. The figure came on the back of a 0.3% decline in December and missed market expectations for an increase of 0.1%. While soft, revealing that turnover may improve in the months ahead, consumer confidence rose strongly in March with an increase to 101.7 reported. The reading was well ahead of the 97.7 figure of February and forecasts for an increase to 98.4 with the index now sitting at the highest level seen since June 2011.
The Day Ahead (All times AEDT)
Having risen strongly yesterday on the back of Chinese stimulus hopes and quarter-end window dressing, the ASX 200 looks set to give back ground this morning with SPI futures pointing to a decline of 33pts on the open. Despite falls in base and precious metals prices overnight, given that the two factors that drove gains yesterday are still well-and-truly in play, quarter-end positioning and stimulus hopes, there’s every likelihood that the index will recover today, perhaps even advance, should Chinese equities continue to bounce as seen earlier in the week.
Propelled higher by short covering, technicals and the belief the RBA no longer deem it to be ‘uncomfortably high’, the AUDUSD continued to surge overnight with the pair touching a high of .9245 before easing modestly in late New York trade. While there is no domestic data scheduled to help influence the pair today, given bullish momentum on the charts, a plethora of spec positions that remain short and the proximity to quarter-end, a period where the Aussie has outperformed compared to most of its major peers, it’s likely that the pair will remain well bid today despite the moderate ‘risk off’ tone seen elsewhere. Support is located at .9220, .9200 and .9150 with resistance kicking in at .9245, .9269 and again at .9300-07.
The CBA/HIA housing affordability survey for Q4 2013 will be released today at 11am. On the regional front we’ll also receive New Zealand trade figures for February at 8.45am.
Data releases out this evening includes the final read of Q4 GDP, jobless claims, pending home sales and the Kansas City Fed manufacturing survey in the US, Eurozone M3, UK retail sales, French consumer confidence, Italian business sentiment along with Spanish mortgage lending figures.
‘Fed speak’ today from James Bullard, St Louis Fed President, at 11.20am from Hong Kong while Sandra Pianalto, Cleveland Fed President, speaks from Ohio at 11.30pm.