Daily Market Update 16 April 2014 - “The great wall of data”

US CPI rose more-than-expected in March with an increase of 0.2% reported<http://www.bls.gov/news.release/pdf/cpi.pdf>. The reading was higher than the 0.1% increase of February, subsequently the same level expected for March, with the year-on-year rate rising to 1.5%. Showing that gains were broad-based, excluding food and energy prices, core inflation rose 0.2%, also double expectations, with the annualised rate ticking up to 1.7% from 1.6% in February.

Manufacturing activity across New York State and surrounds improved at slower pace in April with the Empire State manufacturing survey<http://www.newyorkfed.org/survey/empire/empire2014/2014_04Report.pdf> falling to 1.29. The reading was well below the 5.61 figure of March and expectations for an increase to 8.0 with deterioration in orders, shipments, delivery times, inventories and the length of the average workweek offsetting improved readings in prices paid and received, unfilled orders and the number of overall employees.

US homebuilder confidence rose modestly in April with the NAHB survey<https://www.nahb.org/news_details.aspx?newsID=16768> rising to 47. The reading was above the downwardly-revised 46 figure of March but below expectations for an increase to 49 with the index still well short of the recent series peak of 57 struck in December last year.

Canada existing home sales rose strongly in March with a gain of 1% recorded<http://creastats.crea.ca/natl/index.htm>. The figure was higher than the 0.3% increase of February and was the second-consecutive month of gains after falling in the four months prior.

The Eurozone trade surplus rose more-than-forecast during February with an increase to €13.6b reported<http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/6-15042014-AP/EN/6-15042014-AP-EN.PDF>. The reading was higher than the €9.81b surplus of February 2013 and expectations for an increase to €10b with exports, up €4.3b on year to €153.3b, outpacing a €50m increase imports to €139.7b.

German investor expectations continued to slide in April with the ZEW survey<http://www.zew.de/en/press/2612/zew-indicator-of-economic-sentiment---damped-optimism> falling to 43.2. The reading was below the 46.6 figure of March and expectations for a decline to 45.0 with the gauge now sitting at the lowest level seen since August last year. While the outlook soured, showing just how good the German economy is travelling at present, the current situation index rose sharply with an increase to 59.5 reported. The reading was above the 51.3 figure of March and expectations for a rise to 51.5 with conditions now perceived to be at the strongest level seen since May 2011.

UK CPI continued to ease in March with an annual increase of 1.6% reported<http://www.ons.gov.uk/ons/dcp171778_358581.pdf>. While in line with forecasts, the figure was below the 1.7% rate of February with inflation now growing at the slowest pace seen since October 2009. Mirroring the decline in CPI, producer prices also eased, albeit less than expectations, with an annual increase of 0.5% recorded<http://www.ons.gov.uk/ons/dcp171778_359265.pdf>. While still the lowest level seen since September 2009, the figure was above expectations for a decline to +0.3%.

UK house prices surged in the year to February with the ONS house price index<http://www.ons.gov.uk/ons/dcp171778_359611.pdf> rising by 9.1%. The reading was above the 6.8% rate recorded in January and expectations for an increase of 7.4% with the year-on-year increase now standing at the highest level seen since June 2010.

India wholesale price inflation accelerated more-than-expected in the year to March with an increase of 5.7% recorded. The figure was above both the 4.68% rate of February and expectations for an increase of 5.3% and marked the fastest year-on-year growth seen since December last year. Showing that inflationary pressures were broad-based, CPI also rose with an annual increase of 8.31% recorded. The figure was hotter than the 8.03% pace of February and a smidgen above expectations for a rise of 8.25%.

The Day Ahead (All times AEST)

The ASX 200 looks set to push higher this morning with SPI futures currently pointing to a rise of 9pts on the open. While that is largely a consequence of the late recovery on Wall St overnight, all attention today will be on the China data deluge released at Midday with its perceived strength or weakness likely to dictate movements in the index, particularly the materials sector, in the latter parts of trade. While it may sound a little bizarre, should the data print roughly in line with expectations, something that will indicate the economy is slowing without requiring the need for any additional stimulus, it may actually induce selling across the more China-exposed sectors. Conversely, should we get data that is well away from expectations, it wouldn’t surprise to see the index add to gains, particularly if we’re seeing the same reaction across Chinese equities.

A rare weak session for the AUDUSD overnight with profit-taking before today’s China data, along with the hotter-than-expected CPI print in the States, seeing the pair fall back to .9337 before recovering modestly into the close. As is the case with equities, perhaps the greatest risk of further weakness today will come from an at-expectations China data dump, something that’ll indicate slowing while reaffirming there’s no need to stimulate, with figures that are well away from expectations, be they weak or strong, likely to assist the Aussie in the latter parts of trade. Support is found between .9337-39 and at .9308 with resistance kicking in at .9381 and again above .9400.

Chinese Q1 GDP, along with industrial production, retail sales and fixed asset investment figures for March, will be released today at Midday AEST. After growing at an annualised rate of 7.7% in Q4 2013, economists expect that the economy cooled in Q1 with growth of 7.3% expected. While they’ll take a backseat to the GDP figure, retail sales, something authorities are looking to push given their desire for economic rebalancing, is expected to have increased 11.9% in the year to March, up from 11.8% in February, with industrial production also expected to improve from 8.6% to 8.8%. Last but certainly not least, fixed-asset investment, the single-largest contributor to economic growth, is expected to have grown by 18% from a year earlier, up from 17.9% in February. While the scheduled release time is Midday, going from previous experience, don’t be surprised if the data hits earlier than expected.

The Westpac leading index for March will be released this morning at 10.30am. Besides the China data deluge due out later today, markets will also have to digest Q1 CPI from New Zealand (8.45am) along with Japanese industrial production data for February. On the policy front, Bank of Japan Governor Kuroda is also scheduled to speak from 4.15pm this afternoon.

Data out this evening includes housing starts and building permits, industrial production, MBA mortgage market index and FOMC Beige Book in the States, the final read of March inflation from the Eurozone, UK unemployment along with Italian international trade.

A busy session on the FOMC front this evening with Yellen, Stein, Lockhart and Fisher all scheduled to speak.

Bank of America, American Express, Google and IBM headline the US earnings calendar this evening.

The report will be on hiatus from today. It will resume again on Tuesday, April 29.