Will the USA debt ceiling issue be an issue over the coming week?
European markets have made a steady start since opening this morning with very little in the way of: fundamental policy, high impact news events, or rumours to excite analysts or investors. We’ve received the Italian industrial production number, coming in slightly below expectations at 0.3% up versus the previous month. Year on year the improvement is 1.4% positive.
Overnight we received data revealing that Australian housing finance had increased by 2% from October 2013-November 2013. The jobs advertised in Australia, despite not being a high impact news event, are worth noting given that the data illustrates how buoyant certain sectors are, particularly those reliant on Chinese demand as a ‘pull through’. The annual decline in jobs advertised is now 9% year on year suggesting that Australia’s secular boom, mainly reliant on China in terms of exports, may be reaching an organic point of exhaustion.
The issue of the USA debt ceiling may re-appear this week and next with the current arrangement due to expire within days. Why this hasn’t been a major discussion point in the financial mainstream media of late is a mystery. Perhaps market commentators know that, once all the bluster and political positioning is removed, the inevitable raise will take place. By how much and when will be fascinating to discover. It would appear that the opposing political party wants the Obama administration to come back with head bowed on a regular basis, as opposed to raising the debt ceiling to $20 trillion, in order to prevent this theatrical farce being enacted on a monthly or bi-monthly basis for possibly the remainder of Obama’s term in office.
Italian industrial production shows an increase of 0.30%
The index measures the monthly evolution of the volume of industrial production (excluding construction). In November 2013 the industrial production index seasonally adjusted increased by 0.3% compared with the previous month. The percentage change of the average of the last three months with respect to the previous three months was +0.4. The calendar adjusted industrial production index increased by 1.4% compared with November 2012.
Housing Finance in Australia for Nov 2013 shows 2% rise
November 2013 compared with October 2013: The trend estimate for the total value of dwelling finance commitments excluding alterations and additions rose 2.0%. Investment housing commitments rose 3.0% and owner occupied housing commitments rose 1.4%. In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions rose 1.7%.
Job ads in Australia show signs of stabilisation
Job advertisements have continued to decline for another month but have showed further signs of stabilisation across some states, a private monthly survey has found. ANZ’s job ads survey fell 0.7 per cent in December to take the annual decline to 9 per cent. Job ads fell 0.8 per cent in November.
Overall, labour demand appears to be stabilising or even improving modestly.
A number of different measures of job ads and vacancies have been broadly flat since mid-2013.
Market snapshot at 10:30 am UK time
Asian and Australasian equity markets started the week on a weak footing in part due to Friday’s US jobs report showing the smallest payrolls gain in nearly three years. The ASX 200 closed down 0.38%, the CSI 300 was down 0.51%, and the Hang Seng up 0.19%.
European equities have risen in early trade; STOXX up 0.32%, CAC up 0.30%, DAX up 0.45%, and the UK FTSE up 0.15%. Looking towards the USA open the DJIA equity index future is down 0.16%, the SPX future down 0.22% and the NASDAQ future down 0.14%.
WTI oil is down 0.37% at $92.38 per barrel, NYMEX nat gas is up 1.83% at $4.13 per therm. Gold on COMEX is up marginally by 0.08% at $1248.60 per ounce, with silver down 0.46% at $67.60 per ounce.
Forex focus
The yen climbed 0.7 percent to 103.49 per dollar early in London trade after earlier touching 103.26, the strongest level seen since Dec. 18th. It gained 0.6 percent to 141.48 per euro. The shared currency was little changed at $1.3672 following a 0.6 percent gain last week. The yen reached the strongest in three weeks after bearish bets slid to a six-week low whilst investors weigh the outlook for a reduction in Federal Reserve monetary stimulus.
The difference in the number of wagers by hedge funds and other large speculators on a gain in the euro compared with those on a decline, or net longs, were 14,498 in the week through Jan. 7, the least since Dec. 3rd, CFTC figures show.
The yen has strengthened 1.9 percent versus the dollar this year, the biggest advance among 16 major counterparts, retracing some of the 18 percent slump that came in 2013 due to the unprecedented easing by the Bank of Japan to support Prime Minister Shinzo Abe’s economic strategy. The Dollar Spot Index – tracking the USD versus 10 of its major counterparts, fell 0.2 percent to 1,021.77 after decreasing 0.4 percent at the end of last week, the most since Oct. 22nd.
Australia’s dollar rose 0.4 percent to 90.29 U.S. cents after advancing to 90.42, the highest since Dec. 12th.
The pound traded at $1.6484 early London time after rising to $1.6603 on Jan. 2nd, the highest since August 2011. Sterling was at 82.94 pence per euro after appreciating to 82.31 pence on Jan. 9th, the most since January 2013.
Sterling has gained 7.7 percent in the past six months, the best performer of 10 developed-nation currencies tracked by Bloomberg’s Correlation-Weighted Indices. The euro has strengthened 2.8 percent, whilst the dollar has dropped 2.3 percent. The pound was little changed versus the dollar and euro before reports this week economists said will show U.K. inflation quickened in December and retail sales rose.
Bonds
Treasuries held their gains following their biggest rally in almost four months, economists estimate reports this week will show that U.S. retail sales growth slowed and inflation was moderated. Benchmark 10-year yields were little changed at 2.86 percent early in London. The price of the 2.75 percent note due in November 2023 was 99 2/32.
Germany’s 10-year yield was 1.84 percent early in London, the lowest since Dec. 18th. The rate dropped seven basis points, or 0.07 percentage point, on Jan. 10th, the steepest decline since Sept. 24th. The price of the 2 percent bund due in August 2023 was 101.355.
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