US pending home sales sank by 3.7% in December, the sharpest month-on-month decline seen since December 2013. The reading was below the downwardly-revised 0.6% increase of November and expectations for a further increase of 0.5% with sales in all four survey districts declining over the month.

US initial jobless claims tumbled by 43k to 265k last week. The figure, well below expectations for a decline to 300k, was the largest weekly drop reported since mid-April 2009. Given the huge weekly decline the series 4-week average, a better overall gauge on the state of the labour market, fell to 298.5k from 306.75k seen previously.

The Danish Central Bank stepped up their efforts to defend the EURDKK peg overnight, cutting deposit rate by a further 0.15% to -0.5%. The move, the third seen in less than two weeks, is in response to increased flows into the Danish Krone following the announcement of the ECB’s QE program late last week.

German unemployment fell to an all-time record low in January with a decline to 6.5% reported. The figure was in line with expectations but below the upwardly-revised 6.6% level of December with the figure the lowest level seen since the series began in 1991. In seasonally-adjusted terms unemployment fell by 8k to 2.836m, a figure that was slightly below expectations for a decline of 10k.

German consumer prices spiralled into deflationary territory in January with a decline of 1.0% reported. The drop, below expectations for a decrease of 0.8%, left the annual rate at -0.3%, the fastest pace of deflation seen since July 2009. Using EU methodology the declines were even greater with a monthly fall of 1.3% reported leaving the annual rate at -0.5%. As was the case in December energy prices, having fallen 9% from a year earlier, largely explained the ongoing headline weakness. Without it and food core prices rose by 1.1% on year.

Eurozone monetary growth accelerated at the fastest annual pace since November 2012 in December with an increase in M3 of 3.6% reported. The reading was above the 3.1% pace of November and expectations for an increase to 3.5% with loans to the private sector, something that has been contracting since April 2012, falling by ‘only’ 0.5%, the slowest annual decline seen since July 2012

Eurozone business conditions continued to improve in January with the European Commission’s business climate index rising to 0.16. The figure was higher than the upwardly-revised 0.15 reading of December and expectations for a decline to 0.10 although, putting the improvement into perspective, it remains below the recent peak of 0.23 struck in November 2014. Sentiment in the industrial and services sectors, along with that amongst consumers, all improved modestly during the month.

Mixed data out of Italy overnight with consumer confidence rising strongly while that amongst businesses soured. Consumer confidence rose 4.1pts to 104.0 in January, the highest level seen since July, while business sentiment sank to 97.1 from a downwardly-revised 97.3 in December.

Spanish retail sales soared in December with an annual increase of 6.5% reported. The reading was well above the 1.9% increase of November and marked the fastest pace of growth seen since the series began in 2003. While I may be accused of nit-picking, it is an impressive headline reading, a weak reading for December 2013 probably contributed to beat thanks to a lower base effect. Reflecting this, after adjustments, total sales in 2014 increased by just 1.0%.

UK retail turnover grew at a slower pace in the year to January with the CBI distributive trades balance, after rounding, falling to +39. While below the +61 level of December, the strongest reading seen since January 1988, the figure beat expectations for a decline to +30 with 50% of retailers reporting an increase in sales compared to only 10% who saw falls.

UK house prices inched higher in January with the Nationwide house price index rising 0.3%. The reading, in line with expectations but above the 0.2% increase of December, saw the annual pace of growth slow to 6.8% from 7.2% reported previously.


The Day Ahead (AEDT)

The ASX 200 looks set to make it seven gains in a row today with SPI futures pointing to a gain of 53pts on the open. While there’s little doubt the index will finish higher today, the lower Australian Dollar for one will continue to support firms who generate offshore earnings, with profit-taking in bonds and cash rate futures evident overnight, two big drivers of the ongoing search for yield, I wonder if the index may be vulnerable to some profit-taking today given stellar gains of late.

The AUDUSD continued to tumble overnight with the pair hitting a low of .7721 in early North American trade, a level last seen on July 13, 2009. While heightened RBA rate cut expectations have largely fuelled the decline seen in recent days I expect movements in USDJPY, something of a proxy for USD strength in Asia whenever major Japanese data is released, to be the main driver of movements in the pair today. Support is found at the overnight low with further bids likely at .7700 with resistance kicking in at .7800 and again at .7855.

Australian Q4 producer price inflation along with private sector credit figures for December will be released this morning at 11.30am. Elsewhere in the region we’ll also receive CPI, unemployment, industrial output, household spending, housing starts and construction orders from Japan along with unemployment, bank lending and the latest business expectations survey from Singapore.

A busy economic calendar to round off the week with-market moving events scheduled on both sides of the Atlantic. In North America we’ll receive GDP, Chicago PMI and the final reading of University of Michigan-Thomson Reuters consumer survey for January in the States along with Canada GDP for November. Earlier in the session markets will also gave to digest inflation and unemployment data from the Eurozone, German retail sales, consumer spending and PPI from France, unemployment and PPI from Italy, Q4 GDP and CPI in Spain along with credit data from the Bank of England. On the policy front the Russian Central Bank will also announce their January monetary policy decision.

Chinese manufacturing PMI for January will be released on Sunday at Midday AEDT.


Market Map Jan 30 2015



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