USA poor data prints causes USA indices to reverse before Tuesday’s close whilst Europe anticipates a growth in GDP over the next two years
Focus shifted to the USA in terms of high impact news events on Tuesday, the Conference Board consumer confidence index fell slightly, although the Expectations Index sub section of the overall data showed a significant drop from 70.8 to 75.7. However, as a counter balance the Present Situation sub section rose from 77.3 to 81.7.
In other USA news the Reserve Bank of Richmond survey showed a decline in manufacturing, in particular the shipments data and new orders declined. The backlog of orders reduced whilst manufacturers were less optimistic about their future business conditions than they were a month ago. Firms anticipated slower growth in shipments and new orders. Finally in the USA the Case Shiller house price index missed expectations by a couple of points. Home prices in 2013 closed off up 11.3% for the year.
Turning to European news the expectation for GDP for within the 18 users of the shared currency is now coming in at 1.5% for the year versus previous expectations of 1% according to the Eurogroup via Eurostat. For 2015 2% growth is predicted. However, the authors of the report were at pains to point out that the recovery is fragile; therefore the inference is that it would be unwise to attach too much faith in their predictions at the current time…
The Conference Board Consumer Confidence Index Declines Moderately
The Conference Board Consumer Confidence Index®, which had increased in January, fell moderately in February. The Index now stands at 78.1 (1985=100), down from 79.4 in January. The decline was driven by the Expectations Index, which dropped to 75.7 from 80.8. The Present Situation Index, by contrast, climbed from 77.3 to 81.7. The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cut-off date for the preliminary results was February 13th.
US Manufacturing Sector Softened; Shipments and New Orders Declined
Manufacturing in the Fifth District slowed, according to the most recent survey by the Federal Reserve Bank of Richmond. Shipments and the volume of new orders declined. Hiring flattened, while the average workweek shortened and average wage growth rose. The backlog of orders declined and vendor lead time remained flat in February, as capacity utilization lost traction. Manufacturers were less optimistic about their future business conditions than they were a month ago. Firms anticipated slower growth in shipments and new orders. Additionally, producers looked for flat backlogs and slower growth in capacity utilization.
Home Prices Lose Momentum According to the S&P/Case – Shiller Home Price Indices
Data through December 2013, released today by S&P Dow Jones Indices for its S&P/Case- Shiller Home Price Indices, the leading measure of U.S. home prices, showed that National home prices closed the year of 2013 up 11.3%. This represents a slight improvement over last quarter’s annual rate of 11.2%. In the fourth quarter of 2013, the National Index declined 0.3%. In December, the 10-City Composite remained relatively unchanged while the 20-City Composite showed its second consecutive monthly decline of 0.1%. Year-over-year, the 10-City and 20-City Composites posted gains of 13.6% and 13.4%, approximately 30 basis points lower.
Eurozone 2014 GDP forecast cut to 1% v. Autumn 1.5%
Europe’s economic recovery, which began in the second quarter of 2013, is expected to continue spreading across countries and gaining strength while at the same time becoming more balanced across growth drivers. As it is typical following deep financial crises, however, the recovery remains fragile. Nevertheless, recent positive economic news means that the forecasts for GDP growth this year and next have been raised slightly since the autumn. EU GDP, which rose 0.1% in 2013, is now expected to rise 1.5% this year and 2.0% next year, while growth in the euro area, which was -0.4% for 2013 as a whole, is expected to be 1.2% in 2014 and 1.8%.
Market snapshot at 10:30 PM UK time
The DJIA closed down 0.17%, SPX down 0.13%, and the NASDAQ down 0.13%. In Europe the STOXX index closed up marginally by 0.01%, CAC down 0.10%, DAX down 0.10% and the UK FTSE down by 0.52%.
Looking towards equity index futures the DJIA future is up 0.04%, SPX up 0.07% and the NASDAQ future is up 0.03% at the time of writing – 10:30 PM UK time Feb 25th. The Euro STOXX future is up 0.22%, DAX future up 0.24%, CAC future down 0.34%, with the FTSE future down 0.80%.
NYMEX WTI oil finished the day down 0.79% at $102.01 per barrel, whilst NYMEX nat gas finished the day down 8.17% at $5.00 per therm. COMEX gold finished the day up 0.22% at $1340.90 per ounce, with silver on COMEX up 0.34% at $21.89.
The yen strengthened 0.3 percent to 102.16 per dollar mid-afternoon New York time, reaching the biggest advance on a closing basis since Feb. 3rd. The euro rose 0.1 percent to $1.3743. Japan’s currency climbed 0.3 percent to 140.40 per euro. The yen advanced the most in more than three weeks against the dollar as a slump in China’s currency and its stock market stoked concern growth in the world’s second-biggest economy is slowing.
The yuan dropped for a sixth day on speculation the People’s Bank of China is attempting to ward off speculators before a possible widening of the trading band. The currency fell 0.5 percent to 6.2310 per dollar, according to China Foreign Exchange Trade System prices. That’s the biggest drop since December 2008.
The pound jumped 0.3 percent to $1.6699 after advancing to $1.6823 on Feb. 17th, the strongest since November 2009. The U.K. currency appreciated 0.2 percent to 82.33 pence per euro.
Sterling has rallied 12 percent in the past 12 months, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro appreciated 6.8 percent and the dollar rose 0.9 percent.
The 10-year UK gilt yield dropped three basis points, or 0.03 percentage point, to 2.75 percent at late afternoon London time after declining two basis points during the previous two days. The 2.25 percent bond maturing in September 2023 rose 0.225, or 2.25 pounds per 1,000-pound face amount, to 95.86.
Ten-year yields dropped four basis points, or 0.04 percentage point, to 2.7 percent late afternoon New York time. It was the lowest level since Feb. 20th. Yields earlier approached the 100-day moving average at 2.75 percent. The price of the 2.75 percent security due in February 2024 increased 11/32, or $3.44 per $1,000 face amount, to 100 13/32. Treasuries gained, pushing 10-year note yields to the lowest level in five days, as a gauge of consumer confidence fell more than forecast this month, fuelling demand for the safety of U.S. government debt.
Fundamental policy decisions and high impact news events that could affect market sentiment on February 26th
Wednesday Australia chips in with data on construction work done, expected in up 0.4%. The GFK German consumer climate reading is published expected in at 8.3. A member of the UK’s BoE, (Broadbent) MPC speaks; BOE MPC members vote on where to set the nation’s key interest rates and their public engagements are often used to drop subtle clues regarding future monetary policy. The second estimate for the UK’s GDP will be published, expected in at 0.7% up. Preliminary business investment is expected to have risen in the UK to 2.6%. A sale of 30 year German bonds will take place on Wednesday; the rate is expected to be 2.64%.
Attention then turns to the USA where new home sales are expected to show 406K new home sales. Crude oil inventories are expected to come in at, or around the previous level of one million barrels.
Finally on Wednesday attention shifts to New Zealand, where the trade balance is expected to fall to positive $230 ml. Visitor arrivals are expected in at a similar level to that previously at a 0.2% rise.
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