Daily Market Color 08/09/2013

Daily Market Color

08/09/2013

Economic Reports & Headlines

The economic calendar is light for today, however, it was active overnight. China released four reports last night that merit extra attention. Japan also released a report as that gauges business activity in the island nation.

First we will start off with Tertiary index in Japan. The index measures activity in 13 industries in Japan. On a month over month basis, the report missed consensus by declining more than expected, -30bps Vs -20bps.  

Moving over to China, we got a read on inflation in the country via the CPI. Consumer prices for July were slightly below consensus on a year over year basis, 2.7% Vs 2.8%.

Producer prices in China declined in July on a year over year basis. The decline was more than expected, 2.3% Vs 2.2%. 

Industrial production in the China for July was stronger than expected on a year over year basis, 9.7% Vs 9.0%.

China’s retail sales report for July was strong on a year over year basis, despite it missing consensus by a tiny margin, 13.2% Vs 13.5%.  

Heading over to France, industrial production in the country plummeted unexpectedly on a month over month basis, -1.4% versus 0.0%.

Italy’s merchandise trade report was somewhat lower than the previous reading; nevertheless, it was still a surplus, E$3.1bn versus E$3.2bn.

Consumer prices in Italy were for July better than the previous reading on a month over month basis, 10bps Vs -180bps

UK’s trade report was marginally better than expected in June, -S$8.1bn Vs –S$8.5bn.

Crossing back over the Atlantic to US northern neighbor, Canada, the oil and fresh water rich country released a report on housing starts which hardly deviated from consensus, 192,853 Vs 191,000.

We also got a read on jobs in Canada for July. Employment took an unexpected fall this month, 39.4k Vs 6.0k. The jobless rate ticked up ten basis points to 7.2%.

On the domestic front, the wholesale trade report in the US, for June, disappointed and took an unforeseen dip, -20bps vs 40bps.

Forthcoming Reports

Over the weekend, Japan will be releasing GDP. Economists’ are anticipating an annualized growth rate 3.6%.

Trade

Chinese numbers were great today. The selloff in the SP 500 is unwarranted because the fundamental data needed to validate this move is absent. A wholesale trade report from the US merits passive attention. The deviation from reality should have been easily spotted by market participants throughout today’s session. Let us delve into the details.

Between today and yesterday, China released better than expected trade numbers, better than expected industrial production figures and Chinese consumption, by anyone’s standards, was contrary to Bears’ belief. Retail sales in the country were robust, they grew 13.2%. The consumer price index in China beat economists’ consensus as well. On the domestic front, US jobless claims came in at a pre-recession level. Since we received five good reports that merit extra attention, should the markets teeter in light of a report that historically never garnered any attention? This is why I trade. I trade to take advantage of deviations from reality like the one we all witnessed today.

Now don’t get me wrong, they are some markets that are questionable at the moment. For instance, the Australian dollar could rally from this point until the next catalyst presents itself and consequently resume the longer term selloff. The SP 500 is slightly difficult to make a directional bet on at the moment. I would give it a few days until I pick a direction on it. The Japanese Yen seems as if it could continue to rally, but who wants to open a trade ahead of Japan’s GDP report this Sunday?

I would just stay on the side lines for now. We need more news to further develop conviction for directional bets.