Some positive earnings data (Citigroup ) and the strongest lift in US retail sales since September 2012 shook the market out of its rut last night, pushing stocks on both side of the Atlantic higher. US consumers hit the shops in March, and spending surged 1.1 per cent. It was a particularly positive result as the gain follows a 0.7 per cent lift the month prior. Excluding volatile items (petrol and cars), sales rose 1 per cent -- well above the consensus expectation for a 0.4 per cent gain.
Equities saw decent gains in the US with the S&P500 up 0.8 per cent (1830), not quite offsetting the 0.95 per cent fall for the previous session. The Dow rose 146 points (16,173) and even the Nasdaq managed a solid 0.6 per cent gain (4022), although at the high the index was up 1.2 per cent. Some selling in the biotech space picked up after that, and there was a strong effort at forcing the index lower (-0.3 per cent at the low), although this reversed into the close. Over in Europe, the Dax was 0.3 per cent higher, the CaC rose 0.4 per cent and the FTSE100 was 0.3 per cent higher.
Forex markets pushed the Australian dollar higher overnight, the unit up around 40 pips to 0.9421. Otherwise there wasn’t much action. The euro was down smalls to 1.3821 while the British pound was steady at 1.6729. The yen sits at 101.85.
Rates pushed higher in the US, for only the second session in seven. Moves were small in some cases, with the 10-year Treasury yield up only 2 bps to 2.64 per cent. The 5-year yield posted a stronger gain, rising between 5 bps and 6 bps to 1.61 per cent, while the 2-year yield is at 0.37 per cent. Aussie futures in turn had some decent moves with both the 3s and the 10s down about 5 ticks to 96.97 and 95.980, respectively.
Commodities didn’t see a lot of action outside of Brent. Moves were small, either side of zero for metals, with precious metals a little higher -- gold up $8 to $1327 and silver up 0.1 per cent, although copper was a little weaker. In the crude space, while WTI did nothing ($103.56), Brent surged 1.4 per cent to $108.8 on growing tensions in Ukraine.
Elsewhere, eurozone industrial production rose by 0.2 per cent in February, with annual growth at 1.7 per cent. In the US, business sales surged 0.8 per cent in February, complementing the strong gain in retail sales. Inventories rose 0.4 per cent for the month, US business clearly expecting strong sales growth to be sustained. In terms of the Ukrainian crisis, word is that the Ukrainians -- and by implication the US -- are finally open to allowing a federal system in Ukraine, with greater autonomy in the regions. This was a key demand of Russia and could go some way to defusing tensions in the region.
In markets today, the SPI suggests Aussie stocks will rise 0.4 per cent. Otherwise the key data or macro news-flow will be the Reserve Bank’s minutes (1130 AEST). I think there is little the market can learn from the minutes today in practical terms, but of course the board have boxed themselves into a situation where any commentary that isn’t pessimistic on the economy or deliberately trying to talk down the dollar is seen as dollar positive. Otherwise an assistant RBA governor gives a speech on the Australian bond market at 1230 AEST.
Globally, key data includes US inflation data, the Empire State manufacturing survey, the NAHB housing market index, TIC flows and speeches from a number of Federal Reserve presidents – Charles Plosser, Eric Rosengren, and the Fed Chair herself, Janet Yellen. Outside of that we see UK inflation, the European trade balance and the ZEW survey.
Have a great day…
Adam Carr is a leading market economist.
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