Australia: The Westpac-ACCI Survey of Industrial Trends revealed that economic conditions in the manufacturing sector deteriorated in the three months to September. The Westpac-ACCI Actual Composite was 47.3 in the September quarter, down 4.3 points from 51.6 in the June quarter. A reading of 47.3 indicates a moderate contraction in activity. Nonetheless, there was a noticeable improvement in expectations amongst respondents; the reduction in political uncertainty ahead of the Federal election was likely key. The Expected Composite increased from 54.4 to 55.7 and expectations for 'general business conditions over the next six months' jumped from +3 to +25.
Share Markets: The optimism began to fade in US markets following the surprise decision from the Fed to refrain from slowing down stimulus. After surging in the previous session, the Dow and S&P500 were off their highs falling 0.3% and 0.2% respectively. The Nasdaq, however, gained 0.2%, while European markets extended gains last night.
Bonds: Yields on US treasuries rose last night, lifting from one-month lows in the previous session. There was likely some profit-taking and some positive US economic data also supported the case for higher yields.
A renewed uncertainty about the when the Fed would begin to wind back its stimulus program will keep bonds volatile over the next few months.
Foreign Exchange: Currency markets continued to mull over the Fed's recent decision. US dollar rebounded against most currencies after its sharp fall in the previous session, although the US dollar index remains close to a seven-month low. GBP also weakened on soft retail sales data. The NZD held onto most gains after GDP growth surprised on the upside. With little news locally, the Australian dollar retreated from its highs as the US dollar rose.
Commodities: Most prices of commodities extended their gains last night. Gold prices rose to their highest in a week. Oil was the exception, falling sharply on increased oil production in Libya.
New Zealand: The production measure of GDP rose by 0.2% in the June quarter. With small upward revisions to the previous two quarters, that left annual growth steady at 2.7%. The direct impact of the drought was evident in the 6.4% fall in agricultural production and the 3.8% fall in food manufacturing over the quarter. Together, these two sectors knocked 0.5 percentage points off the rate of growth. Excluding these sectors leaves us with underlying growth at a solid 0.7% for the June quarter.
United Kingdom: UK retail sales fell 0.9% in August, their first fall since April, mainly due to weaker food sales.
The CBI industrial trends survey new orders index jumped to 9 in September, the highest reading this century so far.
United States: The Philadelphia Fed factory index jumped from 9.3 to 22.3 in September, the highest in two and a half years. The detail included a 16-point rise in orders, a 22-point rise in shipments, (both the highest in more than two years,) and a 7-point gain in jobs, (the highest since April last year). This result stands in contrast with the New York Empire manufacturing index, which weakened in September.
US existing home sales rose 1.7% in August to an annualised sales pace 5.48mn, the highest since early 2007. While the resilience in the existing home sales might be a sign that the housing market is withstanding higher mortgage rates, the realtor association spokesman said the sales jump represented a rush by buyers to to lock in mortgage rates ahead of Fed tapering expectations. A softening in new home sales and residential construction puts doubt in the strength of the housing market.
US initial jobless claims rose 15k to 309k in the week ending 14 September however the data has been distorted by a backlog in processing in some States.
The leading index rose 0.7% in August, the fifth straight month without a decline.
The current account deficit narrowed US$6bn to $98.9 bn in Q2, reflecting the jump in exports recorded in the monthly trade data and a bigger income surplus.
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