Originally published by Rivkin Securities
Thursday was another quiet night for global markets with low volumes traded as participants wind down before the festive period. Data overnight from the US showed that the economy expanded at a 3.5% annualised basis for the third quarter, up from the previous estimate of 3.2% and forecasts for 3.3%. The headline durable goods orders (MoM Nov) decreased less than forecast, down -4.6% compared with estimates of -4.8% while a measure which excludes transportation increased +0.5% beating estimates of 0.2% although down from the previous reading of 0.9%. We look at the figures excluding transportation given orders such as aircraft can fluctuate idiosyncratically distorting the figure.
Month-on-month in November personal income was flat at 0.0% missing forecasts of 0.3%, personal spending rose less than forecast, up 0.2% compared with 0.4% previously and estimates of 0.3%. Adjusting for inflation real personal spending rose 0.1% in line with market estimates. The Federal Reserve’s preferred measure of inflation, personal consumption expenditure remained unchanged at 1.4% (YoY Nov) which was slightly less than the 1.5% forecasts. The core measure of the reading was also lower than forecast at 1.6% compared with estimates of 1.7%.
The data is fairly mixed but overall the US economy continues to improve and the outlook is positive. GDP in the fourth quarter is expected to slow but still continue at a decent pace with the Atlanta Fed forecasting growth of 2.5%. Inflation is also expected to pick up thanks to a tighter labour market and president-elect Donald Trump’s inflationary policies, evidenced through rising inflation expectations.
The US Dollar Index was modestly higher in trading this morning, up +0.07% with gains predominantly coming against the Australian dollar (-0.44%) and the British pound (-0.55%). US treasury yields were little changed, with the two & ten year yields at 1.2005% & 2.5552% respectively. Key equity indices pulled back on light volume, both the S&P 500 & Nasdaq 100 down -0.19% & 0.29% respectively.
Locally the S&P/ASX 200 closed higher, up 30.47 points (+0.54%) at 5,643.94. Meanwhile this morning with can expect a flat start to trading, with ASX SPI200 futures down just 3 points in overnight trading. Longer-term the technical outlook for the ASX200 continues to improve after closing at new highs for 2016, albeit at the end of the year. Gains throughout 2016 have been very encouraging, with dips bought quickly a sign of buyers becoming more eager opening up the probability of a move back towards 6,000 in the coming months. In the short-term indicators suggest the strength of gains are fading, and while this does not mean an imminent reversal it suggests the heightened risk of a pause or pullback.
Please note this will be the last morning market wrap for 2016, resuming from January 3rd 2017. Here at Rivkin we wish every a merry Christmas and a very happy new year!
Data releases:
· U.K. GDP (QoQ & YoY Q3) 8:30pm AEDT
· Canadian GDP (YoY Oct) 12:30am AEDT
· U.S. New Home Sales (MoM Nov) 2:00am AEDT
· University of Michigan Consumer Confidence Survey – Final (MoM Dec) 2:00am AEDT
· U.S. Baker Hughes Rig Count (Dec 23) 5:00am AEDT
Chart 1 – ASX200
