The German IFO and US new home sales the major focus data-wise today


MAJOR HEADLINES – PREVIOUS SESSION

  • US Jun. S&P/Case-Shiller House Price Index out at -15.44% vs. -16.4% expected and -17.02% prior

  • US Aug. Consumer Confidence out at 54.1 vs. 47.9 expected and revised 47.4 prior

  • US Aug. Richmond Fed Index out at 14 vs. 16 expected and 14 prior

  • US Jun. House Price Index out at 0.5% m/m, -0.7% q/q vs. 0.4%/-0.4% expected and 0.6%/-0.5% prior

  • US Weekly ABC Consumer Confidence out at -45, as expected, vs. -46 prior

  • JP Jul. Trade balance out at ¥380.2 bln vs. ¥390 bln expected and ¥507.5 bln prior

  • JP Jul. Exports out at -36.5% y/y vs. -38.4% expected and -35.7% prior

  • JP Jul. Imports out at -40.8% y/y vs. -42.4% expected and -41.9% prior

  • AU DEWR Aug. Skilled Vacancies out at +1.0% vs. revised -0.8% prior

  • AU Q2 Construction Work Done out at -0.1% vs. -3.0% expected and revised -2.2% prior

  • JP Aug. Small Business Confidence out at 41.8 vs. 41.1 prior

  • SI Jul. Industrial Production out at +12.4% y/y, +23.0% m/m vs. -1.0%/+7.1% expected and -9.0% prior


THEMES TO WATCH – UPCOMING SESSION

(All times GMT)

  • GE Import Price Index (0800)

  • Sweden Manufacturing/Consumer Confidence (0700)

  • GE IFO Indices (0800)

  • Norway Unemployment (0800)

  • US MBA Mortgage Applications (1100)

  • US Durable Goods Orders (1230)

  • US New Home Sales (1400)

  • US Fed’s Lockhart to speak (1610)

Market Comments:

The data out of the US was on the strong side last night but risk appetite was not able to feast on the positive data. The S&P/Case-Shiller home price index was firmer at 141.86 vs. 139.91 while the US consumer confidence number came in at 54.1, much stronger than the 47.6 expected and 46.6 previously, while later the weekly ABC consumer confidence indicator was more tepid, holding steady at -45. The strong consumer confidence number appeared in stark contrast to the weak Michigan sentiment index reading reported just ten days ago but we will likely have to wait to see which prevails.

The initial reaction to the firmer data conformed to the usual norms i.e. equities higher and the dollar lower, but the risk rally soon ran out of steam and most currencies retreated back lower. The CAD was especially soft on the retreat, pressured by a 3% fall in crude oil prices after attempts to break the $75 level proved unsuccessful and industry data showed a hefty rise in crude stocks. A 1.48% fall in the Reuters-Jeffries CRB Index also did not help the situation. In addition, BOC Deputy Governor Lane commented that there were encouraging signs that Canada will return to positive growth in Q3.

With regard to the CHF, the Swiss national Bank’s Jordan was on the wires with more verbal intervention on the CHF’s level, saying they will fight a CHF appreciation decisively – EURCHF and USDCHF both pushed higher from the lows.

So Asia returned with currencies at similar levels to yesterday, once again risk appetite failing to encourage a breakout from recent ranges despite a series of strong data suggesting that should be the case. What will it take to finally breakout (in either direction!)? As a result, Asian activity was again confined to tight ranges even though equity markets were in a bullish mood.

On the data front, the second-tier Australian data continued to confirm a rosier picture. Job vacancies increased by 1.0% in August, the first monthly rise since November 2007 and across all three major occupational groups. This could be a sign that the Australian labour market remains resilient and may have seen the worst.
Watch out for the next unemployment release scheduled for September 10. The second minor data release showed construction work slipping at a slower pace in Q2, down 0.1% q/q.

In contrast, the data out of Japan disappointed. July trade was extremely sluggish and appeared to contradict the global recovery/consumption story. Exports were down 36.5% y/y, deeper than June’s 35.7% fall, and on a month-by-month basis recorded a 1.3% decline, the first in two months. On a slightly positive note, imports were higher for the first time in four months, though one suspects more a result of higher prices than higher volumes.

In the news overnight, a poll of UK Business leaders reported in the Independent shows them more upbeat about economic recovery prospects than at any time since recession began. 38% of those polled thought there were signs of recovery in their particular sector, an increase from 33% last month, while 50% saw no evidence of a revival (in fact the lowest figure to date). GBP paid no attention to the report. What about the Bank of England?

Ahead in Europe we will see German import prices and Swedish confidence indicators but the spotlight will be grabbed by the German IFO readings. With good new building across the globe, markets are again looking for an improvement in all three readings, though we again are doubtful this will provide enough impetus for the EUR to break higher. Later in the US we will see durable goods orders and new home sales, the latter possibly the final piece in the jigsaw of recovery?