Daily Market Update 4 April 2014 - Did the US labour market thaw in March?

Daily Market Update 4 April 2014 - Did the US labour market thaw in March?

As expected, the European Central Bank left their key refinancing rate steady<http://www.ecb.europa.eu/press/pr/date/2014/html/pr140403.en.html> at 0.25% for a fifth-consecutive month in March. Amidst strong disinflationary forces, President Mario Draghi admitted that the governing council discussed the use of quantitative easing at his press conference<http://www.ecb.europa.eu/press/pressconf/2014/html/is140403.en.html> following the rate decision, telling journalists that ‘it wasn’t neglected’. Elaborating on that statement, he went on to say that ‘there were different preferences about which QE would be most effective’ although admitted that it would ‘not be easy to design a program on private debt that is large in size and doesn’t have risks for financial stability’. Showing that discussions are only in their infancy, something that suggests any program announcement may not occur for many months if at all, Draghi went on to say that policy makers were ‘thinking hard’ and that they would ‘continue working on (it) in the coming weeks’.


US service-sector activity expanded at a faster pace during March with the ISM PMI gauge<https://www.ism.ws/ISMReport/nonMfgROB.cfm> rising to 53.1. While below expectations for an increase to 53.5, the reading was higher than the 51.6 figure of February with all bar two survey components expanding during the month. While five components weakened, the same number that improved, there was a pleasing bounce in employment which rebounded to 53.6 from 47.5 in February.


US initial jobless claims<http://www.dol.gov/opa/media/press/eta/ui/current.htm> rose more-than-expected last week, jumping to 326k. The figure was above the 310k reading of the previous corresponding week and expectations for an increase to 319k and left new claims at the highest level seen mid-February this year.


Planned US job cuts continued to slip in March with the Challenger layoffs series<http://www.challengergray.com/press/press-releases> falling by 30.2% from a year earlier. The figure was better than the 24.4% decline seen in the year to February and was the steepest fall recorded since May last year.


The US trade deficit widened unexpectedly during February with an increase to $42.3b recorded<http://www.bea.gov/newsreleases/international/trade/tradnewsrelease.htm>. The deficit was higher than the $39.3b figure of January and expectations for a decline to $38.5b with the net differential now at the widest level seen since September last year. Helping to explain the reversal, exports fell by 1.1% while imports continued to expand, growing by a further 0.4%.


Eurozone service sector growth slipped in March with Markit’s PMI gauge falling to 52.2. While below the 52.4 ‘flash’ estimate released late last month and 52.6 print of February, the figure was the eighth-consecutive month that activity had expanded. To see how all of the individual nations fared, see below or click here<http://www.markiteconomics.com/Survey/PressRelease.mvc/0df8a17005794a228231ee5fc8bbb8f2> for more details.


Germany<http://www.markiteconomics.com/Survey/PressRelease.mvc/809e149d435c4ce7a97fc1e73fec46b9>:  54.3 (Flash 54.0, February 55.9)


France<http://www.markiteconomics.com/Survey/PressRelease.mvc/5aaddb78a6b249768e1cf6075d840289>: 51.5 (Flash 51.4, February 47.2)


Italy<http://www.markiteconomics.com/Survey/PressRelease.mvc/54df1acc1d224a7d8ef9549ec47e0426>: 49.5 (Forecast 52.3, February 52.9)


Spain<http://www.markiteconomics.com/Survey/PressRelease.mvc/5fb4b4862e4b4c52bd0617d05ebd4313>: 54.0 (Forecast 53.3, February 53.7)


Eurozone retail sales continued to grow in February with an increase of 0.4% reported<http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-03042014-AP/EN/4-03042014-AP-EN.PDF>. The reading was above the downwardly-revised 1.0% increase of January and forecasts for a decline of 0.5% and left the year-on-year change at +0.8%, the same level achieved in January.


UK service sector activity grew at a slightly slower pace in March with Markit’s PMI gauge<http://www.markiteconomics.com/Survey/PressRelease.mvc/7a1dbe8a0478418a9d36f333468d090f> falling to 57.6. The reading was below the 58.2 figure of February, subsequently the same level forecast by economists, and was the lowest level seen since June 2013.


The Day Ahead (All times AEDT)


The ASX 200 looks set to ease modestly this morning with SPI futures pointing to a decline of 6pts on the open. While the index could finish on either side of even, as was the case yesterday, volumes and volatility will likely remain low as investors await tonight’s non-farm payrolls report from the States.



Another ‘nothing’ session for the AUDUSD overnight with the pair continuing to trade in a thin range between .9206-.9244. While it will remain well supported on dips today, it’s all Asian markets have done since early February, it’s likely that the Aussie will continue to range trade today as buying on the downside is offset by profit-taking before non-farm payrolls on the topside. Support is found on any dip below .9220 with resistance likely to kick in on a move above .9250.


US non-farm payrolls for March will be released at 11.30pm this evening. Economists are looking for an increase of 200k, up from 175k in February, with unemployment forecast to fall to 6.6% from 6.7%. Of the secondary releases average hourly earnings are expected to ease to +0.2%, down from +0.4%, although the average work week is expected to rise by 0.2 hours to 34.4 hours. As usual, keep an eye out for revisions to previous month’s data, particularly given adverse weather conditions earlier in the year, with movements there often more influential than the current release itself.


While non-farm will dominate all others, markets will also have to digest factory orders and construction PMI data from Germany, a raft of retail PMI figures from Europe, retail sales from Greece along with Canadian unemployment.


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