SCOREBOARD: Retail anomaly

Markets fell overnight, but the drop was a general pullback and not the fault of US holiday retail.

Stocks had a pretty decent bid last week (the S&P500 was up 3.6 per cent) so I’m not so sure that last night’s falls are indicative of anything – just some pull back from a solid run. I have seen some reports that weak Thanksgiving sales were partly to blame for the more sluggish equity performance, but truth is that wasn’t the case.

Sales were weaker than last year but they were still very strong, up 13 per cent over the year versus 16 per cent increase last year. Indeed, some of the online retailers outperformed the market last night and had a decent session – 'cyber Monday' is apparently the biggest online shopping day of the year. This year sales are forecast to rise 20 per cent.

In any case, consumer stocks weren’t the key underperforming sector. Energy took that honour following another 0.7 per cent fall on crude ($87.7). That’s not to say consumer stocks had a good session; they were off about 0.6 per cent, which was similar to healthcare and telecoms. Tech stocks in contrast outperformed and the Nasdaq was flat (2966) at the time of writing (about an hour to go). Otherwise we saw the Dow off 0.6 per cent (-75pts to 12,934) and the S&P500 was down 0.3 per cent (1404).

Over in Europe, finance ministers are meeting to decide on Greece. Everyone seems confident that a deal will be reached and the French finance minster went in to the meetings saying such a deal had basically already been agreed, implying this was a fine tuning meeting. Comments from the Irish finance minister would complement that view. So the deal as reported is that creditors would lower the interest rate they charge Athens, the ECB would give back profits it gets on bonds held and of course, Greece would get more time to pay off its debt.

On the issue of further writedowns, which the IMF is in favour of but the Europeans (Germans) are not, this has been ruled out. Unfortunately the confidence expressed by politicians didn’t seem to spread through the market and European stocks were all weaker, with the Dax off 0.2 per cent, the FTSE down 0.6 per cent and the CaC 0.8 per cent lower. Italian bond yields did however head lower – about 4bps to 4.69 per cent – while the Spanish equivalent did little to finish at 5.61 per cent, having initially pushed higher.

On the rates side, price action was nondescript and moves were small, as is often the case these days. The US 10-year yield is at 1.66 per cent, the 5-year is at 0.67 per cent and the 2-year is at 0.26 per cent. Aussie futures had a little more action up 3-4 ticks, with 3s at 97.32 and 10s at 96.855. It was the same for forex; moves were small and there was no action to speak of. The Australian dollar is at 1.0454, the euro is 1.2964, yen is 82.15 and British pound is at 1.6017.

Bits and pieces then. On the data front we saw two regional Fed activity indexes – Chicago and Dallas – and both deteriorated slightly. The Chicago Fed index fell to -0.56 from 0 and the Dallas Fed index to -2.8 from 1.8.

Looking at the day ahead, the SPI suggests the All Ordinaries will be flat roughly – up a few points as I write (4434). Otherwise, macro events today are few. In our region, we see Chinese industrial profits at 1230 AEDT and that’s largely the lot. This evening we see German import prices, the OECD’s economic outlook and US data consists of durable goods, house prices (S&P CaseShiller and FHFA), consumer confidence and the Richmond Fed activity index.

Have a great day…

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