Markets Now: Retail numbers push US equities even larger

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US equities rose larger nonetheless on the back of the most up-to-date US retail numbers.

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Today’s podcast

Overview: Only satisfied when it rains

 

  • An additional day, an additional record higher for US equities
  • US information not as superior beneath the hood as the headlines recommend
  • China credit information a superior omen ahead of today’s Q4/December information, but also not as robust as it seemed

There’s some beautiful pictures in The Australian this morning following the rain that fell across swathes of New South Wales yesterday, like the beleaguered South Coast, 1 in specific of two RFS volunteers in Milton dancing in the puddles. The shift in the Indian Ocean Dipole from intense optimistic to neutral that the Bureau of Meteorology has been noting in the previous week or so appears to be weaving its magic, bringing cooler and wetter situations to the north of the nation and now travelling south. Go rain.

Meanwhile in the far more trivial economic globe

Suffice to say it is been onwards and upwards for US equites to fresh record highs (hardly desires saying definitely does it?) accompanied by a fresh nudge larger in US Treasury yields of 1.five-two.5bps and a slightly larger US dollar, up about a tenth of  % and aided by robust headline prints for final night’s financial information but which are not practically so impressive beneath the hood.

The banner U.S. release final evening was December retail sales, which in headline terms rose by .three%, in line with consensus, but ex-autos by .7%, above the .five% consensus and the so-named manage measure which feeds into the private consumption element of GDP, rose by .five% against .four% anticipated. The superior news ended there, because the October and November manage reading had been collectively revised down by .five%, the significance of which is that the Atlanta Fed has revised down its estimate of Q4 US GDP to 1.eight% from two.three% exactly where it stood following final week’s US employment report.

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Also not rather as superior as it seemed

The Philadelphia Fed index jumped impressively, to 17. in January from two.four in December, and although the new orders and employment sub-indices each rose, delivery occasions and inventories each fell. It is also becoming the case that the Philadelphia area is significantly less exposed to trade with China, such that the strength in the headline and orders readings must not be observed as a harbinger of robust nationwide (ISM) information when released at the get started of February.

On the incredibly optimistic side

Weekly jobless claims have now retraced all of their early December jump to be back at the lowest levels because final November.

Also out final evening, quickly following we went house, was the December China credit and funds provide information, which come in front of today’s Q4 GDP and December activity readings.  Right here, the most closely watched Aggregative Financing element rose by a substantially stronger than anticipated ¥2.1tn. even though this is flattered by the inclusion of all sorts of government bond issuance, not just ‘special’ government bonds – the latter ordinarily utilised by regional governments with the blessing of Beijing to finance stimulus activity/infrastructure spending off-balance sheet. When the prior months’ numbers are adjusted for this, the November comparative statistic is ¥1.9tn, not the initially reported  ¥1.75tn. Nonetheless, nonetheless a optimistic modify against expectations for a modest fall, and a optimistic indicator for today’s December activity. This following China’s VP Liu He yesterday was out saying development is projected to be above six% in 2019 with information indicating a much better than anticipated outlook.

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On the topic of Liu He

Following the formal signing of the Phase 1 US-China trade agreement yesterday, the Vice Premier revealed that the agreement to boost US purchases by $200bn more than two years was to comprise $32bn added agricultural imports (above 2017 levels), $52.4bn of power goods, $77.7bn in manufactured goods and $37.9bn of solutions. He claimed that the deal on agriculture will not impact third party’s interests (i.e. wouldn’t come at the expense of lowered imports from other components of the globe) but did not explicitly say the exact same about these other 3 sectors. So there is currently chatter that in order to meet their commitments, China could scale back some imports of manufactured goods and power goods from elsewhere.  Paranoia probably, but a thing to maintain in thoughts vis-a-by way of Australia and New Zealand.

In markets

US equities come into the final hour of NYSE trade with the S&ampP up .six% and the Dow and NASDAQ each +.7%. All S&ampP sectors are in the green, like a .six% get for financials and exactly where Morgan Stanley jumped some eight% at the open following reporting much better than anticipated earnings, led in specific by stronger bond trading income.

In FX

It is rather a mixed image, exactly where the NZD and GBP are each displaying gains of about .25%, the NZD boosted by yesterday morning’s ANZ inflation indicator – a superior proxy for non-tradeables inflation – which rose .eight% q/q.  Our BNZ colleagues note this is above their and RBNZ estimate of .six% q/q.  A .eight% outcome would see the annual price lift to three.three% a fresh decade-higher, not excellent optics compared to prevailing expectations of a slight dip. It was observed to add to the case for no RBNZ easing in sight and certainly regardless of whether the RBNZ’s language could shift to adopt a far more hawkish tone.  Why GBP is stronger is anyone’s guess, possessing lately been beneath the pump from weak incoming industrial production and month-to-month GDP information alongside dovish comments from different BoE officials.

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Other G10 currencies are down by among .1% and .three%, with AUD/USD .1% reduced on Wednesday’s New York close at .6895, so providing back the gains we saw in the course of our session yesterday and exactly where the Aussie arguably drew a tiny assistance from a firmer CNY and much better than anticipated domestic Property Loans information.

Coming up

China GDP and December activity information at 13:00 ET.  Consensus is six.% for the YTD y/y figure and six.% for the straight y/y quantity. Threat is to the upside following VP Premier Liu’s comments noted above. Ditto for the month-to-month activity numbers following final night’s credit and funds provide information.  All of them are anticipated to show practically unchanged annual development prices versus November, at five.six% for Industrial Production, five.two% for Fixed Asset Investment and eight% for Retail Sales.

This evening, the key releases are UK Retail Sales (anticipated +.eight% m/m ex-auto fuel), final EZ CPI, US Industrial Production (anticipated -.two% following 1.1% in November), JOLTS job openings and the preliminary January University of Michigan Customer Sentiment Index.

Industry costs

For additional FX, Interest price and Commodities facts take a look at nab.com.au/nabfinancialmarkets