Daily Market Update 3 April 2014 - Big domestic session, eyes on NFP
US private-sector hiring accelerated in March with the ADP national employment report revealing<http://www.adpemploymentreport.com/2014/March/NER/docs/ADP-NATIONAL-EMPLOYMENT-REPORT-March2014-Final-Press-Release.pdf> an increase in payrolls of 191k. Despite missing estimates for a rise of 195k, the figure was an improvement on the upwardly-revised 178k pace of February with hiring now back at levels last seen in late 2013.
US factory orders rose strongly in February after falling more than first thought in January with an increase of 1.6% reported<http://www.census.gov/manufacturing/m3/prel/pdf/s-i-o.pdf>. The reading was higher than the downwardly-revised 1.0% fall of January and expectations for an increase of 1.2% with the surge the largest month-on-month increase recorded since September 2013.
US mortgage applications fell for a sixth week in eight last week with the MBA mortgage market index sliding by a further 1.2%. Refinancing fell by 2.9%, offsetting a 0.9% increase in new mortgages, while the average 30-year mortgage rate held steady at 4.56%.
Business conditions across New York State improved at a slower pace in March with the New York ISM index<http://www.ismny.org/newsimages/ISM-New%20York%20Report%20on%20Business%20March%202014.pdf> falling to 52.0. The reading was below the 57.0 figure previously seen in February with all survey components, including a 7.9pt drop in the employment gauge, softening during the month.
Confirming what was already known from national indices released over the past week, Eurozone producer prices continued to decline in March with a fall of 0.2% reported<http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-02042014-AP/EN/4-02042014-AP-EN.PDF>. The reading was below expectations for no change overall with the year-on-year rate sliding to -1.7%, the steepest contraction seen since December 2009.
Spanish unemployment fell sharply in March, declining 16.6k against expectations for a fall of 14.5k. The decline left the overall number in employment at 16.44m, up 0.16% on February.
UK construction activity expanded at a fractionally slower rate in March with Markit’s construction PMI gauge<http://www.markiteconomics.com/Survey/PressRelease.mvc/adc40a04947d4a7db3635fdcfc833370> falling to 62.5. The figure was below February’s 62.6 reading and expectations for an increase to 63.0. Despite the fall, adding to optimism about readings in the months ahead, 59% of survey respondents expected activity to grow further in the year ahead, the highest percentage recorded since January 2007.
UK house prices grew modestly in March with the Nationwide house price index<http://www.nationwide.co.uk/~/media/MainSite/documents/about/house-price-index/Mar_2014.pdf> rising by 0.4%. The figure undershot expectations for an increase of 0.8% but still left the year-on-year rate at 46-month high of 9.5%.
The Day Ahead (All times AEDT)
The ASX looks set to push higher for a second-consecutive session today with SPI futures pointing to a rise of 18pts on the open. While there are plenty of risk events today, retail sales, trade figures and Glenn Stevens talking just to name a few, given the proximity to non-farm payrolls tomorrow evening, we anticipate that volumes and volatility will be low as traders await this key market-moving event.
A quite session for the AUDUSD overnight with the pair operating in a relatively-thin band between .9232 and .9263. Today almost all of the attention will be domestically, at least in the short-term, with retail sales and trade figures for February set to dictate direction. While strong readings will see the Aussie push higher initially, with the US data starting to strengthen and March non-farm payrolls released tomorrow evening, we expect that any initial surge will be faded as investors look to book profits following the Aussie’s stellar run of late. Conversely, should the data miss, expect the pair to give back ground, albeit modestly, given Asia’s insatiable appetite of late. Support is found at the overnight low, .9218, .9209 and again at .9200 with resistance kicking in at .9261 and above .9284.
A busy and highly-important domestic data calendar arrives this morning with the release of retail sales and trade figures for February along with the AIG Performance of Services Index for March. Not to dismiss the relevance of the latter, it is an important cog in the domestic economy, particularly for employment, all attention today will be on the retail sales and trade figures with economists expecting an increase of 0.3% in retail turnover, down from 1.2% in January, along with a trade surplus of $800m. While a gain in sales is all but expected, turnover has risen for the past nine months, based off recent trade data from China, along with falling base metals and ore prices of late, we feel that there is a risk that surplus figure may well undershoot. The PSI gauge is released at 9.30am with the retail and trade numbers following soon after at 11.30am.
RBA Governor Glenn Stevens will address the Australia-American Chamber of Commerce in Brisbane at 1pm this afternoon. Given the proximity to his speech last week in Hong Kong and the release of the April policy statement on Tuesday, we don’t expect that he’ll deviate too far from what we’ve heard in recent days.
Regional data releases today include services PMI figures from China, both the NBS and Markit numbers, Japan and India. While all are important, most attention will fall on the Chinese figures with the official gauge released at 12pm with the Markit release following suit at 12.45pm.
Amidst clear disinflationary pressures, the ECB meet to discuss interest rates this evening with no change in policy expected. While their key rate is likely to remain at 0.25% with risks for any change slanted to the downside, most interest this evening will be on ECB President Mario Draghi when he addresses the media following the policy decision. Will he attempt to jawbone the Euro? What actions will he take if disinflation persists? These are just some of the questions he’ll hopefully answer later on this evening. The official rate announcement is released at 10.45pm with Draghi’s press conference due soon after at 11.30pm.
Economic releases this evening include services PMI gauges from the US, Europe and UK, trade figures from the US and Canada, jobless claims and Challenger layoff series from the US along with Eurozone retail sales.