Daily Market Update 14 April 2014 - Soft day for risk assets expected

US stocks continued to selloff on Friday, led once again by the tech-heavy Nasdaq index, with losses ranging from 0.89% to 1.34%. For the week the Nasdaq fell 3.1%, the steepest decline since June 2012, while the DJIA and broader S&P 500 logged falls of 2.35% and 2.65% respectively. For all the bearish chatter of late, all three indices are yet to officially correct, fall by at least 10%, with declines from recent highs currently standing at -8.51%, -3.71% and -4.37% respectively.

US consumer sentiment continued to improve in April with the Thomson Reuters-Uni of Michigan consumer survey rising to 82.6. The figure was higher than both the 80 reading of March and expectations for an increase to 81 with the index now sitting at the highest level seen since July 2013. Breaking down the survey, the current conditions index rose 1.4pts  to 97.1, the highest level seen since December, while the economic outlook gauge jumped 3.3pts to 73.3, a level not seen since August last year.

US producer price inflation rose more-than-expected in March with an increase of 0.5% reported<http://www.bls.gov/news.release/pdf/ppi.pdf>. The reading was well above estimates for an increase of 0.1% and left the year-on-year rate at +1.4%, the highest level seen since August last year. Showing that gains were not just down to volatility in food and energy prices, core prices jumped 0.6%, the largest month-on-month increase since August 2011, with the annualised increase coming in at +1.4%, above the +1.1% pace expected.

German CPI was confirmed<https://www.destatis.de/EN/PressServices/Press/pr/2014/04/PE14_136_611.html;jsessionid=637AA999CF17EA944AAFA5CF74A177B7.cae2> at +0.3% in March with the year-on-year figure also holding steady at a 43-month low of +1.0%. Mirroring the subdued reading there, Spanish CPI<http://www.ine.es/en/daco/daco42/daco421/ipc0314_en.pdf> rose by 0.2% in March, in line with expectations, with the annual rate rising to -0.1%, up from -0.2% in February.

UK construction output sagged in February after rising strongly in January with a decline of 2.8% reported<http://www.ons.gov.uk/ons/dcp171778_357934.pdf>. The reading was below the upwardly-revised 2.1% increase of January and expectations for a decline of 1.3% with output from year earlier up by 2.8%.

Indian industrial production fell unexpectedly in the year to February with a decline of 1.9% reported. The figure was below the 0.8% increase of January, revised up from 0.1% previously, and expectations for an expansion of 0.9% with production now contracting at the fastest pace seen since January 2012.

India’s trade deficit grew in March with an increase to $10.51b recorded. Exports fell by 3.2% from a year earlier to $29.58b, outpacing a 2.1% decline in imports ($40.09b).

The Day Ahead (All times AEST)

The ASX 200 looks set to start the new trading week in the red with SPI futures pointing to a decline of 14 points on the open. While the index has shown remarkable resilience of late, given an escalation of tensions in Ukraine<http://www.bloomberg.com/news/2014-04-13/-crunch-time-for-u-s-eu-as-pro-russians-battle-ukraine-forces.html> over the weekend, it’s likely that losses today will be greater than what futures currently suggests.

The AUDUSD has opened slightly softer this morning with the pair currently fetching .9389. Support is located at .9381, .9363 and at .9350 with resistance kicking in between .9400-10, .9426 and again at .9461.

Data out this evening includes retail sales and business inventories from the US, Eurozone industrial production along with Italian CPI. As you would expect, all attention will be on the retail sales figure from the US with economists expecting both the headline and core readings to increase by 0.4% from February.

Citigroup reports Q1 earnings this evening.