Daily Market Update 28 March 2014 - Quarter-end, speculation to drive direction

Daily Market Update 28 March 2014 - Quarter-end, speculation to drive direction

US GDP was revised higher<http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm> overnight, expanding 2.6% in annualised terms. While below the 2.7% pace expected, the reading was an improvement on the 2.4% pace reported in the second estimate with personal consumption, revised up to 3.3% from 2.6%, largely responsible for the improved Q4 performance.

US initial jobless claims fell heavily last week with a figure of 311k reported<http://www.dol.gov/opa/media/press/eta/ui/current.htm>. The reading was below the 321k pace of the previous corresponding week and expectations for a rise to 323k with total new claimants now sitting at the lowest level seen since late November 2013.


US pending home sales continued to fall in February, bucking expectations for a rise of 0.2%, with a decline of 0.8% reported<http://www.realtor.org/news-releases/2014/03/february-pending-home-sales-continue-slide>. The figure, the eighth-consecutive monthly fall in a row, was below the downwardly-revised 0.2% decline of January and left the annualised rate of sales at -10.2%, the largest contraction recorded since April 2011.


Manufacturing activity across Missouri State and surrounds accelerated in March with the Kansas City Fed manufacturing index<http://www.kc.frb.org/publicat/research/indicatorsdata/mfg/pdf/2014Mar27mfg.pdf> rising to +10. The reading was higher than the +4 figure of February and expectations for an increase to +5 and left the index at the highest level seen since February 2012.


Eurozone M3<http://www.ecb.europa.eu/press/pdf/md/md1402.pdf> rose by 1.3% in the year to February, a figure that was in line with forecasts and above the 1.2% expansion of January. Despite the small increase, lending to business and households continued to slip, falling 2.2% on year after contracting 2.3% in February.


UK retail sales surged in February, offsetting a sharp contraction in January, with the ONS reporting<http://www.ons.gov.uk/ons/dcp171778_358049.pdf> an increase of 1.7%. The figure, the largest month-on-month increase recorded since May 2013, largely offset the downwardly-revised 2.0% decline of January, the sharpest month-on-month contraction since May 2011, and left the annual rate of change at 3.7%, down 0.2% on February.  Mirroring the moves in headline rate, core sales, that which excludes auto-related purchases, rose 1.8%, well above the 0.3% increase expected, with the year-on-year rate pulling back to 4.2% from 4.4% prior.


French consumer sentiment hit the highest level since July 2012 in March with INSEE’s consumer survey<http://www.insee.fr/en/indicateurs/ind20/20140327/cam1403_eng.pdf> rising to 88. The figure was above the 85 level of February, subsequently the same level expected by economists, with improved readings for personal finances, the standard of living, unemployment and savings capacity largely responsible for the robust monthly result.


Italian business sentiment ticked higher in March with ISTAT’s business confidence index<http://www.istat.it/en/archive/116607> rising to 99.2. While below the 99.5 reading expected, the figure was above the 99.1 print of February and left sentiment at the highest level seen since June 2011.


Further dreary mortgage data from Spain overnight with total approvals and amount lent continuing to contract in the year to January. Approvals logged a decline of 32.4%, below the 30.1% fall of January, while the amount lent improved fractionally, rising to -25.8% from -26.3% prior.


The Day Ahead (All times AEDT)


The ASX 200 looks set to fall this morning, at least according to SPI futures that is, with a decline of 4pts expected. Despite the softness in futures, given gains in base metals, iron ore and crude overnight, coupled with the proximity of quarter-end, there’s every chance the index will finish today’s session flat or even higher, particularly should rumours about additional Chinese stimulus do the rounds, something days like these are notorious for.


Having been the second-best performer of G10 currencies against the USD so far in Q1, the AUDUSD has brushed aside stronger US data overnight with the pair continuing to push higher on the back of short covering and window-dressing. While it is approaching overbought territory on several momentum-based indicators, given we still have two days left in the quarter, coupled with the ongoing rise in base metals and iron ore, presumably on hopes for further Chinese stimulus, it’s hard to see a catalyst to push the AUD lower at present, at least in the short-term. Support today starts at .9250-45, .9215 and at .9200 with resistance kicking in at .9272, .9300 and again at .9339.


Regional data releases today include unemployment, consumer price inflation, retail sales and household spending from Japan while in South Korea we’ll also receive services and manufacturing confidence, industrial production along with the latest leading index.


A busy economic calendar to end off the week with a raft of releases scheduled on both sides of the Atlantic. In Europe we’ll receive consumer confidence figures from the UK and Eurozone, CPI in Germany and Spain, PPI from France and Italy, the final reading of Q4 GDP from the UK, French consumer spending, German import prices along with retail sales from Spain. Across the pond markets will also have to digest core PCE price inflation, the FOMC’s preferred measure of price pressures, the final reading of the University of Michigan-Thomson Reuters consumer survey for March along with incomes and spending data for February from the US.


‘Fed speak’ today is provided today by Charles Evans, Chicago Fed President, at 12.30pm in Hong Kong along with Esther George, Kansas City Fed President, at 3.45am tomorrow morning.


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