Market Update - 2 May 2013

• A lot of countries were out yesterday on labour day, but that didn’t stop some poor data to take market back into some risk off mode.

• The main data to miss expectations were the US’ ADP, private payrolls rose only 119k in Apr (forecast: 150k), the least since Sep, while the Mar data was also revised down from 158k to 131k. Meanwhile, construction outlays slumped 1.7% mom in Mar (forecast: +0.6%), after an upwardly revised 1.5% gain in Feb, as a 4.1% fall in taxpayer-funded projects outweighed a homebuilding gain, and total/domestic vehicle sales were also disappointing.

• USDMYR followed and opened higher to 3.0500, but we are not expecting much from the pair, expecting very light flow and range still at 3.0100-3.0600. Elections are just 3 days away and things are certainly heating up. There’s a lot to discuss here but I reckon I will just say, let’s wait for Sunday night and see what the outcome is, if any delay in the results announcement then I guess we can expect something unexpected perhaps….

• Nothing unexpected from FOMC, and statement open-ended, with the committee “prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes”, but markets are somewhat disappointed by apparent lack of dovishness in terms of the inflation language in particular as the recent slate of economic data continued to point to a decelerating economy. Market focus now turns to ECB where a 25bp rate cut has been largely priced in, and key is whether they will deliver.

• Meanwhile, US’ manufacturing ISM also moderated from 51.3 in Mar to 50.7 in Apr (forecast: 50.5), and the employment gauge fell from 54.2 to 50.2, the slowest in five months, and dampening market expectations for tomorrow’s nonfarm payrolls (with market consensus shifting lower to around 145k). Meanwhile, other global leading indicators also pointed to a softening manufacturing momentum – China’s PMI fell from 50.9 to 50.6 while UK’s PMI also contracted for a third month, albeit improving from 48.6 to 49.8 (still in contraction territory).

• FOMC and the data overnight didn’t help the equity markets, Dow -0.94%, S&P -0.93%, and Nasdaq -0.89%. Commodity stocks led the decline as oil and copper prices slipped. Other slippages included Merck & Co (after cutting its full-year forecast) and Allergan Inc. VIX +7.17% to 14.49.