There was plenty of negative economic data circulating in the USA on Thursday, however, despite a raft of poor prints the main indices in the USA defied the data and rose strongly throughout the day. Even poor earnings reports from Google and Amazon only caused a slight ‘wobble’ on the markets, just as the market close was pending…
Pending home sales fell sharply in December, naturally holiday seasonal factors and the atrocious weather conditions we’re rolled out as excuses. So the clever thing to do is to defer to this time last year’s data to see if that holds true. And we find that last year sales were down 4.3% in the same month, so perhaps we can cut the realtors some slack and suggest that yes, it could be a seasonal blip and it could be the very bad weather. Or it could be that with wages hardly rising in real terms for decades in the USA that the consumer is right near the edge of what he or she can afford in terms of a mortgage.
Unemployment weekly claims came in worse than expected, we’re a bit tired of reminding readers and ourselves that despite unemployment apparently improving, so much so that Ben Bernanke used it as part justification for tapering the QE3 programme, the weekly claims always seems to remain in a range of 320-350K. The labour participation rate is at lows not seen since crises of the 1970’s/1980’s and yet the powers that be in the USA will go to great lengths to explain that the labour market is improving as the BLS figures are published each month.
Finally, completing our unholy trinity of bad data for Thursday, the latest GDP estimate for the USA came in at 3.2% down from 4.1% in the last quarter of 2013. Despite this poor print many in the financial mainstream media, we shouldn’t name names, but one begins with B the other with R heralded the news as good news, suggesting that improved consumer spending caused the GDP figure to come in at 3.2%, strangely below ‘their’ expectations.
December Pending Home Sales Fall
Pending home sales measurably dropped in December, with abnormal weather partly inhibiting home shopping in much of the U.S., according to the National Association of Realtors®. Declines were experienced in all four major regions. The Pending Home Sales Index,* a forward-looking indicator based on contract signings, fell 8.7 percent to 92.4 in December from a downwardly revised 101.2 in November, and is 8.8 percent below December 2012 when it was 101.3. The data reflect contracts but not closings, and are at the lowest level since October 2011, when the index was 92.2.
Unemployment insurance weekly claims report
In the week ending January 25, the advance figure for seasonally adjusted initial claims was 348,000, an increase of 19,000 from the previous week’s revised figure of 329,000. The 4-week moving average was 333,000, an increase of 750 from the previous week’s revised average of 332,250. The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending January 18, unchanged from the prior week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending January 18 was 2,991,000, a decrease of 16,000 from the preceding week’s revised.
US Gross Domestic Product, 4th quarter and annual 2013 (advance estimate)
Real gross domestic product — the output of goods and services produced by labour and property located in the United States — increased at an annual rate of 3.2 percent in the fourth quarter of 2013 (that is, from the third quarter to the fourth quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 4.1 percent. The Bureau emphasized that the fourth-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency.
Market overview at 10:30 PM UK time
The DJIA closed up 0.70%, SPX up 1.13% NASDAQ up 1.77%. Euro STOXX closed up 0.53%, CAC up 0.55%, DAX up 0.39% and the UK FTSE closed down 0.09%.
The DJIA equity index future is at the time of writing (10.30 PM UK time January 30th) up 0.33%, SPX up 0.70% and the NASDAQ future is up 1.06%. Euro STOXX future is up 0.23%, DAX future up 0.11%, CAC future up 1.14% and the UK FTSE up 0.24%. The Athens exchange 20 future is up 4.35%.
NYMEX WTI oil finished the day up 0.63% at $97.97 per barrel with NYMEX nat gas down 9.99% at $4.92 per therm. COMEX gold finished the day down 1.48% at $1243.50 per ounce, with silver on COMEX down 2.13% at $19.14 per ounce.
Forex focus
The dollar strengthened 0.8 percent to $1.3551 per euro mid-afternoon New York time to extend its longest rally since Nov. 1st. The U.S. currency gained 0.4 percent to 102.72 yen, while the euro slipped 0.4 percent to 139.21 yen. The dollar strengthened a fifth day versus the euro as U.S. consumer spending rose the most in three years a day after the Federal Reserve scaled back bond purchases that weaken the greenback and support global asset prices.
The yen has advanced 4.5 percent this year, the biggest gain in Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The dollar has gained 1.6 percent and the euro is little changed. Canada’s dollar is the worst performer, falling by 3.8 percent.
The pound dropped 0.5 percent to $1.6489 at late afternoon London time. It rose to $1.6668 on Jan. 24th, the highest since May 2011. The U.K. currency gained 0.4 percent to 82.16 pence per euro after appreciating to 81.68 pence on Jan. 22nd, the strongest level since Jan. 10th, 2013.
The pound fell for a third day versus the dollar as Federal Reserve policy makers yesterday trimmed stimulus after Bank of England Governor Mark Carney repeated his pledge to keep U.K. interest rates low.
Bonds briefing
The UK 10-year gilt yield dropped one basis point, or 0.01 percentage point, to 2.75 percent after falling to 2.72 percent, the least since Nov. 20th. The 2.25 percent bond maturing in September 2023 climbed 0.105, or 1.05 pounds per 1,000-pound face amount, to 95.815.
The yield on the USA 10-year note gained two basis points to 2.70 percent mid-afternoon in New York. The 2.75 percent note due November 2023 slipped 6/32, or $1.88 per $1,000 face amount, to 100 14/32. The yield rose as much as five basis points and dropped seven basis points Wednesday and touched 2.66 percent, the least since Nov. 19th. Treasuries declined, with 10-year yields climbing from a two-month low, as the U.S. sold $64 billion of notes, the first time it conducted two fixed-coupon debt auctions in a single day since October 2008.
The Treasury drew the highest auction demand since 2012 this week as it sold $111 billion in four note offerings as investors sought the safe haven of U.S. government debt amid turmoil in emerging markets, even as the Federal Reserve cut its monthly bond-buying.
Fundamental policy decisions and high impact news events that could affect market sentiment on January 31st
On Friday housing starts in Japan are expected to come in at 13.9% up. German retail sales are expected to be up 0.5% from the previous month’s increase of 1.5%. French consumer spending is expected to come in down -0.2% for the month, against a figure of 1.4%+ previously. Italy’s unemployment rate is expected to come in no change at 12.7%, whilst Europe’s will see no change at 12.1%. The CPI flash estimate for Europe is expected in at 0.9% up year on year.
Focus is then on North America as Canada publishes its monthly GDP, expected in at 0.2%, down a tick from the 0.3% previously. In the USA personal spending is expected in at 0.2% up, down from the 0.5% up previously. The Chicago PMI is expected to print at 59, whilst the revised university of Michigan report is expected to show a reading of 81. The final news of the week will show China’s manufacturing PMI, expected in circa the previous reading at 51.
