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Retail figures show steady growth

Share Markets:

Sentiment in financial markets weakened on Friday, despite US jobs data beating expectations. Investors were possibly concerned on the drop in earnings.

Equity markets in both Europe and US fell. In the US, the Dow closed 1.0% lower, and the S&P500 dropped 0.8%.

Interest Rates: 

Yields on US treasuries initially spiked to an intraday high of 2.02% following the strong jobs data, but then fell to 1.94%.

Despite the improving job market, weak earnings suggested that there is limited inflationary pressure coming from wages and that the Fed could continue to be "patient" in raising interest rates.

Yields on Australian bond futures were marginally lower.

The 3-year slipped 1 basis point to 2.10% and the 10-year fell 3 basis points to 2.65%.

Foreign Exchange: 

The US dollar fell against most major currencies, although the US dollar index also spiked on the jobs report, and ground lower as markets digested the news.

The weaker US dollar helped the Australian dollar edge up back to above 82 US cents overnight.

Commodities: 

Oil prices continued to slide to a new near-six year low, although prices recovered after a US oil services firm Baker Hughes reported a large drop in the number of US oil drilling rigs.

Gold prices rose in line with weaker financial market sentiment and the weaker US dollar.

Australia: 

Retailing grew by 0.1% in November, following healthy gains in the two months to October. 

The renewed pessimism among consumers in recent months, according to consumer sentiment surveys, could have moderated household spending in the lead up to Christmas.

Annual growth slipped from 5.7% in October to 5.0% in November, the weakest pace in six months.

However, the annual pace of growth remains well above the long-run average of 4.3%.

Anecdotes suggest that retail sales through most of December were modest but a turnaround came in the week before Christmas.

These reports in addition to low interest rates and the upswing in housing suggest that moderate growth in consumer spending is in prospect.

In other data, the AiG performance of construction index fell 1 point to 44.4 in December.

China: 

Consumer prices rose by 0.3% in December, in line with consensus expectations. 

The annual consumer inflation rate hovered at a near five-year low of 1.5% in December, giving policymakers more room to ease policy to support growth. 

The world's second-largest economy still faces formidable headwinds this year as a property market downturn persists and local governments and companies are struggling to repay debt.

Meanwhile, the producer price index in December declined 3.3% from a year earlier, its biggest decline since September 2012. 

The fall in producer prices in the month was largely because of a fall in global oil prices.

Europe:

German exports fell 2.1% in November, their third fall in four months.

Further adding to the disappointing data from Germany, industrial production fell 0.1% in November, its second fall in the past four months.

Industrial production contracted at an annual pace of -0.5% in November.

New Zealand: 

Home building permits rose by 10% in November to hit a seven-year high. 

The monthly percentage rise was the biggest gain since April 2013.  In unadjusted terms, 2,420 new dwellings were consented in November (including 474 apartments).

United Kingdom: 

UK industrial production fell 0.1% in November, led by a 5.5% drop in oil and gas extraction, a 3.7% fall in mining and 1.3% fall in utilities output.

In the factory sector, output rose 0.7% reversing October's 0.7% fall. Meanwhile, construction spending fell 2% in November and exports were down 0.4%.

United States: 

US nonfarm payrolls rose 252k in December, and back revisions added 50k to the payrolls count earlier in Q4.

Payrolls jobs growth averaged 289k per month in the quarter, the fastest since the start of this century.

The strong pace of job growth was a bit at odds with a decline in earnings -  average hourly earnings fell 0.2% in December, reversing a 0.2% gain in November (revised from 0.4%).

The unemployment fell from 5.8% to 5.6%, a 6½ year low, although its decline was helped by a decline in workforce participation from 62.9% to 62.7%.

While the strong job growth on its own might have brought forward the possible timing of a rate hike by the Federal Reserve, this is mitigated by the softness in wages.

Consensus estimates are centring on June as the date for the first rate hike by the Federal Reserve.

US wholesale inventories rose 0.8% in November, reflecting both gains in stocks of durables and non-durables stocks, but weighed down by gasoline prices.

Topics:  economics economy retail st george update



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