Business spending up as markets tip-toe around Syria

Australia: 

Business spending rose by 4% in the June quarter. 

But on a year ago is down 2.3%, a far cry from the double-digit rates of growth recorded as recently as last year in the September quarter.

We received the third estimate for investment plans by firms for 2013-14.  We estimate final investment spending (using realisation ratios) will be down 1.4% on spending last financial year.

HIA new home sales fell 4.7% in July, although this follows four consecutive months of gains. The July decline was driven by ex-units. All major States, (NSW, VIC, SA, WA) except for Queensland saw declines.

Share Markets:

With developments regarding Syria still uncertain, financial markets turned their attention to economic data last night. An upward revision to US GDP in Q2 and a positive jobs report were supportive of sentiment.

The S&P500 rose 0.2%, the Dow gained 0.1% while the Nasdaq rose 0.8%.

Bonds:

US treasuries were relatively unchanged but were volatile. Yields on 10-year bonds rose after the GDP release, but then retreated later on.

This was despite last night's economic data supporting the case for the Fed to taper its asset purchases as soon as September. 

Foreign Exchange:

The US dollar rose against most currencies on firming expectations that the Federal Reserve could slow its stimulus next month - the US dollar index rose to its highest in four weeks.

The Australian dollar lifted to an intraday high of 0.8988 but then fell to around 0.892, reflecting the growing prospect of Federal Reserve tapering. However, the Aussie gained ground against other currencies.

AUD recovered from multiyear lows against the euro and Swiss franc, as currencies from emerging economies stabilised and as fears of an imminent strike on Syria eased. 

Commodities: 

Commodity prices weakened, led by oil and gold prices. Oil prices retreated with some uncertainty regarding a potential military strike on Syria.

Gold prices came under pressure as the worries about an attack on Syria eased, and as positive economic data bolstered the case for the Fed to wind down its asset purchases.

Europe:

German unemployment rose 7k in August, its first rise in three months, although the jobless rate was steady at 6.8%.

In other data from Germany, the preliminary CPI fell from an annual pace of 1.9% to 1.5% in August, the lowest inflation rate since May.

Japan:

Japanese retail trade fell 1.8% in July, below expectations for a 1.0% fall.

The drop took the annual rate to a 0.3% decline, and provides some indication that the optimism from the aggressive BoJ monetary policy stimulus and rising share markets is starting to fade.

Economic reform by the Japanese government will be a necessary step for a sustained recovery in the Japanese economy.  

New Zealand:

ANZ business confidence declined from 52.8, a 14-year high, to 48.1 in August. Confidence remains elevated, with the index suggesting a net 48.1% of companies expect the economy will improve over the next 12 months. 

United States:

GDP growth in Q2 was revised up from an annualised pace of 1.7% to 2.5%.

The upgrade largely reflected a revision to net exports with export growth stronger and import growth weaker than previously reported.

Subsequently, the 0.8 percentage point drag on the GDP from net exports has now been revised away.

US initial jobless claims fell 6k to 331k in the week ending 24 August, continuing to run close to the lowest level for claims in five years.



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