Market Update November 25

US economic growth cooled in October, at least according to the Chicago Fed’s national activity index, with their gauge slipping to 0.14. The reading was below the downwardly-revised 0.29 figure of September and came despite 49 of 85 individual components making positive contributions during the month. While the index remains above the -0.46 level of August, it remains well below the 0.70 level sighted by the Chicago Fed that indicates ‘an increasing likelihood that a period of sustained increasing inflation has begun’.

US service-sector growth continued to slow in November with the flash Markit services PMI gauge slipping to 56.3. The reading was below the 57.1 level of October and forecasts for a decline to 56.8 and marked the slowest pace of expansion seen since April. Overall slower new business growth was more than enough to offset strength in the employment subindex which rose to the highest level seen since June.

Manufacturing activity across Texas grew at the same pace as October during November with the Dallas Fed manufacturing index holding steady at 10.5. While the headline figure was unchanged, it was interesting to see that 12 of 16 survey components deteriorated with the perceived outlook for firms also weakening during the month.

German business confidence increased for the first time since April in November with the IFO business climate index rising 1.5pts to 104.7. The reading was higher than the 103.2 figure of October and expectations for a decline to 103.0. Current conditions gained 1.6pts to 110.0, the first increase in 4 months, while expectations ticked up 1.4pts to 99.7, the first gain seen since April. Despite the bounce all three indices have fallen 5.9pts, 2.4pts and 9.1pts respectively over the course of 2014.


The Day Ahead (AEDT)

The ASX 200 looks set to slip modestly this morning with SPI futures pointing to a decline of 3pts on the open. Having outperformed yesterday materials look set to drag today with BHP and RIO both giving back around half of Friday’s gains overnight. Throw in another steep slide in the crude price, something that will likely impact the energy sector, and it looks like it’ll be left up to financials, tech and consumer discretionary to do most of the heavy lifting as was the case on Wall St overnight.

The Australian Dollar has underperformed overnight, both against the greenback and the crosses, with the former slumping to as low as .8598 before bouncing modestly into the close. With no major data scheduled domestically it’ll be largely left up to the movements in USDJPY yet again to determine which direction the pair travels in today. Support kicks in at .8600, .8588 and at .8564 with resistance emerging at .8720, .8750 and again at .8680.

Regional releases today include Singapore Q3 GDP along with Hong Kong trade figures for October. Given doubts over the accuracy of Chinese export figures, all eyes will be on the latter, particularly the import figure from the Mainland. On the policy front the Bank of Japan release the minutes of their October monetary policy meeting at 10.50am, an event that will likely be a market-mover given the surprise decision to increase asset purchases at this meeting, while RBA Deputy Governor Philip Lowe will speak at 8.05pm this evening. Will the AUD jawbone be delivered once again? Perhaps, but more importantly, will the markets pay any attention if it is given a lack of follow-through action elsewhere.

Data releases this evening include GDP figures from the US and Germany, retail sales from Canada and Italy, two house price indices and the Richmond Fed manufacturing survey from the States along with the latest business climate index from France.


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