Daily Market Update 2 May 2014 - Markets snooze before payrolls
US manufacturing activity expanded at the fastest pace since December 2013 in April with the ISM manufacturing PMI index rising to 54.9. The figure was above the 53.7 reading of March and forecasts for an increase to 54.3 with all bar one survey component expanding during the month. Of particular importance, particularly in light of recent and upcoming data, the employment indicator jumped to 54.7, the highest level since December, while new export orders and imports, something that disappointed in the Q1 GDP release, both expanding strongly with readings of 57.0 and 58.0 recorded.
US initial jobless claims jumped sharply last week with an increase to 344k reported. The figure was above the 330k pace seen in the previous corresponding week and forecasts for a decline to 320k with the reading the highest level seen since late February this year.
Planned US job cuts rose modestly in the year to April with the Challenger layoffs series increasing by 5.2%. The 40,298 figure was above the 34,399 pace of March, a rise of 17%, and the first month in three that an increase had been recorded.
US personal spending jumped in March with an increase of 0.9% recorded. The figure was stronger than the 0.6% increase expected and the highest level seen since August 2009. While not as impressive as the spending figure, personal incomes also outperformed with an increase of 0.5% reported. The reading was above the 0.4% increase expected and was the third-consecutive month that a gain of 0.4%+ had been recorded. After adjustments for PCE inflation, something that grew 0.2% on month, real incomes rose 0.3%, the third-consecutive month that an increase had been recorded.
US construction spending rose fractionally in March with an increase of 0.2% reported. While an improvement on the downwardly-revised 0.2% decline seen in February, the reading was below forecasts for an increase of 0.5% and left overall construction spend some 8.4% above the same levels of a year ago. Overall a 0.7% lift in residential activity was largely offset by a 0.1% decline in non-residential construction.
Canadian manufacturing activity expanded at a slightly slower pace in April with the RBC’s PMI gauge slipping 0.4pts to 52.9.
UK manufacturing activity accelerated sharply in April with the Markit/CIPS PMI gauge surging to 57.3. The figure was above the 55.8 reading of March and expectations for a decline to 55.4 and left the index at the highest level seen since November 2013.
UK consumer credit leapt unexpectedly in March with the Bank of England reporting a net increase of £1.1b. The figure was higher than the £600m expansion of February, also the same level eyed in March, and was the largest monthly increase seen since September 2012. While consumer lending was strong, it was a mixed performance on the mortgage front with new approvals rising by 67.1k, below the 72.0k pace expected, although net lending did impress, jumping by £1.8b to the highest level seen since January 2012.
The Day Ahead (All times AEST)
Having tried and failed to hold initial gains over the past three sessions, the ASX 200 will be looking to make it fourth time lucky to end the week with SPI futures pointing to a rise of 14pts on the open. While bargain-hunting may well emerge given declines earlier in the week, given the bearish price action since Tuesday, there’s a more-than-reasonable chance that any initial strength will be sold into later in the session.
A weak session for the AUDUSD overnight with the pair sliding to a low of .9261 following another failure to clear resistance camped above the .9300 level. While hardly convincing price action, given Asia’s propensity to ‘buy the dip’ of late, you’d be hard-pressed today to call anything but yet another slow grind higher. Support is found between .9250-61 and again at .9228 with resistance located at .9280 and above .9300.
Domestic data releases today include HIA new home sales for March (1100) along with Q1 producer price inflation (1130). Given expectations for a ‘boom’ in housing construction, the HIA release is likely to garner plenty of attention.
Regional data releases today include unemployment and household spending from Japan, South Korean manufacturing PMI and ANZ’s commodity price index for New Zealand.
The biggest data event of the month arrives this evening with the release of US non-farm payrolls for April. Economists expect net payrolls growth of 215k, up from 192k in March, with unemployment expected to tick down to 6.6% from 6.7%. Of the secondary releases, average hourly earnings are expected to grow 0.2% after printing flat in March with the average workweek expected to hold steady at 34.5h for a second-consecutive month. As ever, keep an eye out on revisions to prior data, particularly in light of adverse weather conditions in February, as they’re often more influential than the near-term release itself.
Besides payrolls, markets will also have to digest factory orders and New York ISM from the States, manufacturing PMI gauges from Europe and India, Eurozone unemployment along with construction PMI from the UK.