US industrial output surged in November with an increase of 1.3% reported. The reading, the largest expansion since May 2010, was well ahead of the upwardly-revised 0.1% increase of October and expectations for a gain of 0.7%. A 5.1% surge in utilities output, along with a 1.1% gain for manufacturing, was enough to offset a 0.1% contraction in mining sector output.

Manufacturing activity across New York City contracted unexpectedly in November with the Empire State manufacturing index slipping to -3.58. The figure, below the 10.16 level of October and expectations for an increase to 12.40, was the lowest level seen since January 2013. In what is a concerning sign new orders and the 6-month business outlook, two lead indicators on activity, fell to -1.97 and +38.58 respectively, well below the +9.14 and +47.61 levels of a month earlier.

US homebuilder confidence dipped fractionally in December with the NAHB index slipping to 57. The figure was below the 58 level of November, also the same level eyed for December, and was only the second month in seven that a deterioration has been recorded. Two of the surveys three components fell during the month whilst prospective buyer foot traffic held steady at 45.

UK factory orders rebounded modestly in December with the CBI industrial trends order balance rising to +5. The reading was a slight improvement on the +3 level of November, also the same figure expected for December, with the reading the highest seen since August. 25% of firms saw above trend growth whilst 19% reported lower, an outcome that saw the headline figure after rounding rise to +5. Mirroring the gain in orders expectations also improved with the balance jumping to +16 from +12 in November.

India wholesale price inflation was unchanged in the year to November. The reading, below the 1.77% rate of October and expectations for a decline to 1.41%, was the lowest level seen since July 2009. A 4.9% drop in fuel prices, the sharpest annual decline since October 2009, along with a 0.6% gain in food prices, down from 2.7% previously, largely explains the deceleration in inflationary pressures.


The Day Ahead (AEDT)

The ASX 200 looks set to extend its decline into a sixth session today with SPI futures pointing to a fall of 36pts on the open. With sentiment understandably frayed and further steep falls in commodity prices overnight, all eyes will be on the flash China manufacturing PMI gauge released at 12.45pm for direction. Given the recovery on the index yesterday and levels of short positioning, an upside surprise, something that can’t be ruled out given the timing of the APEC summit in November, may actually see modest buying return in the latter parts of the session. Until then, as it has been for the vast majority of December, crude oil futures will likely determine how far the declines extend in the early part of the session. Should the losses accelerate many will be hoping that the 5122 level, the October low, holds firm.

The AUDUSD has remained under pressure overnight with the pair trading in a relatively thin range of .8202-67 throughout. While it continues to grind lower, given the resilient performance it’s displayed over the past few sessions and the proximity to the release of the FOMC policy decision on Thursday morning, there’s every chance the pair may catch a bid today should we get no surprises from the RBA minutes, Debelle’s speech or an ugly China PMI miss. Support starts at .8200 with no meaningful levels until .8086 below with support kicking in above .8260, .8300 and again at .8360.

The minutes of the RBA’s December monetary policy meeting will be released at 11.30am this morning. With the statement largely unchanged from what has been seen in recent months it’s unlikely that any major surprises will come from this release. Later in the session Guy Debelle, Assistant RBA Governor, will deliver a speech to the 27th Australasian Finance and Banking Conference from 12.15pm in Sydney.

Chinese flash manufacturing PMI will be released at 12.45pm this afternoon. Having fallen to 50.0 in November markets are expecting a small bounce to 50.3 in December. Later in the evening we’ll also receive flash manufacturing PMI gauges from the US, Eurozone, Germany and France, housing starts and building permits from the US, CPI, PPI and the latest house price index from the UK, trade figures from the Eurozone and Italy along with German investor sentiment. On the policy front the Bank of England also release their half-yearly financial stability report.


Market Map Dec 16 2014



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