Market Map Dec 13, 2014

Mixed economic news out of China overnight with industrial production and urban fixed asset investment continuing to cool while retail sales and new lending came in ahead of expectations. Industrial production expanded by 7.2% in the year to November, a result that was below the 7.7% rate of October and expectations for a slowdown to 7.5%. Urban fixed asset investment increased by 15.8%, in line with expectations, although the figure was the lowest level seen since December 2001. While they disappointed retail sales topped expectations, rising 11.7%. The growth rate, higher than the 11.5% level of October, was the fastest seen since August. In what is a surprising outcome given lending tends to taper off in the second half of the calendar year private lending expanded by ¥852.7b during November. The reading, higher than the ¥548.3b level of October and expectations for an increase to ¥650b, was the fastest November expansion since records began in 2004.

The International Energy Agency downgraded their growth outlook for 2015 global oil demand overnight, slashing 230k barrels per day off their forecast to 900k. With the crude price already under pressure markets reacted accordlingly, sending the price of WTI and Brent lower by an additional 3%.

US consumer confidence surged to highs not seen since January 2007 in December with the preliminary University of Michigan-Thomson Reuters consumer sentiment index rising to 93.8. The reading, stronger than the 88.8 level of November and expectations for an increase to 89.5, was driven by gains in current conditions and expectations with both gauges increasing by 3 and 6.2pts respectively.

US producer prices slipped by 0.2% in November, below the 0.1% decline expected, with the annualised rate slowing from 1.5% to 1.4%. Excluding energy and food prices, volatile items that can skew the headline reading, prices held steady with the annual rate also remaining unchanged at 1.8%.

Ratings agency Fitch downgraded the French sovereign rating from AA+ to AA earlier this morning sighting deteriorating projections for French government debt dynamics.

Eurozone industrial output grew 0.1% in October, below the 0.2% expansion expected, although the annual rate of change accelerated to +0.7% from +0.2% in September. Durable and non-durable consumer goods output increased by 0.9% and 1.8%, fractionally overshadowing a 1.8% decline in energy.

Eurozone employment grew by 0.2% in the September quarter, a result that was fractionally below the 0.3% pace of Q2, although the annualised rate ticked up 0.6% from 0.4%, the highest level achieved since Q2 2011.

Italian consumer prices rose by 0.3% in the year to November, above the preliminary estimate of 0.2% reported earlier in the month, with price disinflation easing from contractionary levels seen earlier in the year. While they improved Spanish CPI fell 0.5% over the same time period, the equal-steepest pace of deflation since October 2009.

German wholesale price inflation fell by 0.7% in November, the steepest drop since October 2013, with the annual rate of change slipping to -1.1%, the lowest level since April this year.

Indian industrial output contracted by 4.2% in the year to October. The reading, well below the +2.5% rate of September and an acceleration to +2.8%, was the first time activity had contracted since March this year and marked the steepest annual contraction since October 2011. A 7.6% decline in manufacturing output, the largest since February 2009, was the chief catalyst behind the headline miss with the decline offsetting strong growth in mining and energy output. While that was a disappointment there was better news on the inflation front with consumer prices growing just 4.38% in the year to November. The reading was lower than the 5.52% rate of October and expectations for a decline to 4.50% and marked the slowest pace of growth since the series began in January 2012.


Monday’s session Ahead (AEDT)

The ASX 200 looks set to fall for a fifth-consecutive session with SPI futures pointing to a decline of 63pts on the open.

The AUDUSD finished the trading week buying .8242. With commodity prices weak and with the MYEFO update arriving midway through the session, a test of buying support below .8220 looks likely.

Australian new motor vehicle sales for November will be released at 11.30am this morning. Elsewhere in the region we’ll also receive the Q4 Tankan survey from Japan, Singapore retail sales along with Indian wholesale price inflation.

Data releases this evening include industrial output, Empire State manufacturing and NAHB homebuilder confidence from the States along with UK industrial orders.


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