Daily Market Update 30 April 2014 - All eyes yet again on the Fed
US consumer confidence slipped unexpectedly in April with the Conference Board index<https://www.conference-board.org/data/consumerconfidence.cfm> falling to 82.3. The figure was below the 83.9 reading of March, upwardly-revised from 82.3 seen previously, and expectations for a decline to 83.2 with a 4.2pt drop in current conditions offsetting a 0.1pt rise in expectations.
US metropolitan house prices continued to advance in February, albeit at a slightly slower rate, with the CaseShiller house price index<http://www.housingviews.com/wp-content/uploads/2014/04/CSHomePrice_Release_Feb2014-results.pdf> rising by a further 0.76%. The reading was below the 0.8% increase of January, the same gain forecast by economists, and left the year-on-year advance at 12.86%, the slowest growth seen since August 2013.
Eurozone consumer confidence rose more-than-first-thought in April with the European Commission index<http://ec.europa.eu/economy_finance/db_indicators/surveys/documents/2014/esi_2014_04_en.pdf> coming in at -8.6. The reading was above the -8.7 preliminary estimate released earlier in the month and left sentiment at levels not seen since October 2007.
Eurozone M3 grew fractionally in the year to March with an increase of 1.1% reported<http://www.ecb.europa.eu/press/pdf/md/md1403.pdf>. The figure was below the 1.3% expansion of February and expectations for an increase of 1.4% and left growth only 0.1% above the previous low of 1% struck in December 2013. Mirroring the performance seen there, private sector loans contracted 2.2% from a year earlier, the same level recorded in February, with the reading only 0.1% above the record-low level of -2.3% struck in January 2014.
The UK economy continued to expand strongly in Q1 with growth of 0.8% reported<http://www.ons.gov.uk/ons/dcp171778_361287.pdf>. While below the 0.9% expansion forecast, the reading took growth from a year earlier to 3.1%, the fastest year-on-year increase recorded since Q4 2007.
Germany CPI fell at faster rate than expected in April with a decline of 0.2% reported<https://www.destatis.de/EN/PressServices/Press/pr/2014/04/PE14_149_611.html;jsessionid=16E0E3011428E29A2A0538D74E1F1AA5.cae2>. The reading was below the 0.1% fall expected and 0.3% gain of March with the year-on-year rate rising to +1.3%, up from +1.0% in March. Using harmonised EU methodology, prices fell by 0.3% on month, far sharper than the 0.1% decline expected, with the annual rate ticking up 0.2% to +1.1%.
German consumer confidence held steady heading into May with the forward-looking GfK survey<http://www.gfk.com/Documents/Press-Releases/2014/20140429_GfK-Konsumklima-April-2014_efin.pdf> holding at 8.5. Improvements in price and income expectations were offset by falls in business expectations and participant’s willingness to consume.
Spanish unemployment rose more-than-expected in the three months to March with an increase to 25.93% recorded. The reading was higher than both the 25.85% rate expected and downwardly-revised 25.73% figure of Q4 2013.
Italian business confidence continued to improve in April with ISTAT reporting<http://www.istat.it/en/archive/120142> an increase to 99.9. The figure was above the 99.3 reading of March and expectations for an improvement to 99.5 with sentiment now at the highest level seen since June 2011. In a separate report, retail sales slipped unexpectedly in February with a fall of 0.2% reported<http://www.istat.it/en/archive/120107>. The figure was below the flat reading of January, subsequently the same level expected by economists, and left the year-on-year rate at -1%, below the -0.9% contraction seen previously. Despite the weak result, should spending patterns mirror the improvement in consumer sentiment of late, stronger readings are likely to arrive in the period ahead.
The Day Ahead (All times AEST)
The ASX 200 looks set to rebound modestly to end the month with SPI futures pointing to a rise of 23pts on the open. While the price action witnessed yesterday was bearish to say the least, given falls across the materials sector have outpaced those seen in commodity markets, coupled with underlying investor demand for yield despite yesterday’s selloff in financials, the index should be able to hold its gains today should concerns over China and the federal budget remain contained.
A quiet night for the AUDUSD overnight with the pair operating in a thin range between .9240-80 throughout. While the price has hardly been convincing of late, with Japanese markets returning and large market-moving events to come, it’s likely that the pair will continue to range trade today until the FOMC release at 4am tomorrow morning. Support is located at .9259, .9250 and at .9228 with resistance kicking in above .9280 and again above .9300.
Australian private sector credit figures for March will be released at 11.30am Economists are looking for an expansion of 0.4% for the month, a figure that’ll leave the annual rate at +4.5% should it eventuate. Given focus on the housing market of late, expect housing credit, particularly the investor component, to also garner plenty of attention.
Regional data releases today includes manufacturing PMI, industrial production, housing starts and construction orders from Japan, industrial production and business confidence from South Korea along with building permits and business confidence figures from New Zealand. On the policy front, the Bank of Japan will announce their latest monetary policy decision with no change in stance expected.
The US FOMC conclude their April monetary policy meeting this evening with the decision and subsequent policy statement due out at 4am AEST. As they have done since late last year, monthly asset purchases are expected to be ‘tapered’ by a further $10b to $45b at this meeting. Given this is a near-certainty, the wording of the policy statement will likely be the greatest influence on markets in the period following its release.
Economic data releases this evening include GDP figures from the US, Canada and Spain, inflation readings from the Eurozone, Italy and Spain, retail sales from Germany, Spain and Greece, unemployment from Germany and Italy, PPI figures from France, Italy and Canada, ADP national employment report and MBA mortgage market index from the US along with French consumer spending. Given it was confusing just writing about the data schedule, expect plenty of market volatility in the period before the FOMC decision!