US service sector activity expanded at the slowest pace since June 2014 in December with the ISM’s PMI gauge falling to 56.2. The reading, below the 59.3 level of November and expectations for a decline to 58.0, was led by deterioration across all sub-sectors with business activity, new orders and inventories amongst the largest decliners for the month. In what will no doubt interest the FOMC as they continue to debate the timing of rate normalisation the prices paid component, a measure on inflationary pressures, fell to just 49.5, the first time a sub-50 reading has been recorded since September 2009. In line with the ISM survey the separate Markit services PMI gauge also slipped, falling to 53.3 from 56.2 in November, the equal-lowest level since October 2013.

US factory orders fell for a fourth-consecutive month in November with a decline of 0.7% reported. The figure matched the decline recorded in October but was below expectations for a decrease of 0.5% with core orders, that which exclude transportation items, slipping by a smaller 0.6%.

Eurozone service sector activity grew less-than-first-thought in December with the final Markit PMI gauge slipping to 51.6. The reading, below the 51.9 flash estimate released late last month but above the 51.1 level of November, was largely due to weakness in the periphery with Germany, France and Spain recording levels that were equal to or higher that what had been previously seen in November.

Germany: 52.1 (Prior 52.1, Flash 51.4, Forecast 51.4)

France: 50.6 (Prior, Flash 49.8, Forecast 49.8 – 9-month high)

Italy: 49.4 (Prior 51.8, Forecast 52.0 – 3-month low)

Spain: 54.3 (Prior 52.7 – 3-month high)

UK service sector activity expanded at the slowest pace since May 2013 in December with the Markit/CIPS PMI gauge sliding to 55.8. The reading was below the 58.6 level of November and expectations for a small decline to 58.5 with new order growth expanding at the slowest pace seen since April 2013.

Australian government 10-year bond yields fell to 2.606% overnight, the lowest level seen since at least 1976.

Another bad session for crude oil overnight with WTI and Brent futures falling to $47.55 and $50.52 a barrel respectively. Despite bouncing from those lows both finished down in excess of 3% for the session.


The Day Ahead (AEDT)

The ASX 200 looks set to extend its selloff today with SPI futures pointing to a fall of 21pts on the open. Given most risk assets continue to be driven by crude oil futures expect the movements in that space to be influential on the overall index today. If the pattern established in the States is adhered to locally defensive sectors such as telecommunications, utilities, consumer staples and healthcare should help to underpin the index today.

The AUDUSD has given up all of yesterday’s post-trade balance gains overnight with the pair currently fetching .8094. With no major data releases scheduled domestically it’ll likely be movements in crude oil futures, something of a risk barometer in recent months, that will determine which direction the pair travels in today. Still, despite the overall bearish trend, it’s still likely that the Aussie will have to move higher before it can move lower given positioning and recent softness in some US economic data. Support kicks in at .8080 and at .8036 with resistance located at .8100, .8150 and again at .8220.

The AIG’s performance of services index for December will be released at 9.30am this morning. Having failed to expand since February last year expectations are understandably low heading into the release.

Data releases this evening include the ADP national employment report, MBA mortgage market index and international trade from the States, CPI and unemployment from the Eurozone, unemployment and retail sales from Germany, unemployment and CPI from Italy along with Canadian international trade. On the Fed front the minutes of the FOMC’s December monetary policy meeting will also be released at 6am tomorrow morning. Expect all attention to be centred on discussions towards the outlook for inflation and labour market along with the possible negative impacts of the stronger USD.


Market Map Jan 7 2015
















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