US retail sales plummeted by 0.9% in December. The figure, well below the downwardly-revised 0.4% increase of November and expectations for a decline of 0.1%, was the largest month-on-month percentage decline seen since January 2014. Mirroring the move in the headline figure core sales, that which excludes auto purchases, fell by 1.0% following a downwardly-revised 0.1% increase in November, with the contraction the largest recorded since March 2009. While far too early to call a trend, if the Fed are looking for economic tailwinds for consumption based on lower gas prices, it clearly isn’t evident yet.

The Federal Reserve released their latest Beige Book on current economic conditions overnight with the document stating that ‘national economic activity continued to expand during the reporting period of mid-November through late December, with most Districts reporting a “modest” or “moderate” pace of growth’. In a sign that the ongoing plunge in energy prices is beginning to impact activity the paper also notes that ‘overall demand for energy-related products and services weakened somewhat during the reporting period’.

US import prices fell by 2.5% in December. While below expectations for a decline of 2.9% the month-on-month fall was still the largest recorded since December 2008. As you would expect falling energy prices were largely to blame for the decline with petroleum-based prices dropping 16.6% from November.

US mortgage applications surged last week with the MBA mortgage market index jumping 49.1%. The increase, the largest month-on-month percentage gain since late November 2008, was broad-based in nature with refinancing and new mortgages surging by 66.4% and 23.6% respectively. Perhaps explaining the bounce, the average 30-year mortgage rate dipped 12bps to just 3.88%, a level not seen since mid-May 2013.

The door to outright sovereign bond purchases by the ECB was left ajar overnight with the European Court of Justice ruling that ‘in principle’ such actions undertaken by the ECB adhered to EU law. The ruling, brought on by Germany asking for clarity on whether the ECB’s Outright Monetary Transactions program was within their EU treaty, should allow the ECB to begin sovereign bond purchases without the threat of legal proceedings, likely beginning at the end of this month.

Eurozone industrial production edged higher in November with an increase of 0.2% reported. The reading, below the upwardly-revised 0.3% increase of October but ahead of expectations for flat growth overall, left the annual decline at 0.4%, down from an increase of 0.8% seen previously. Declining energy and non-durable consumer goods production were offset by increased output in intermediate, capital and consumer durable goods.

French CPI rose 0.1% in December, a reading that was higher than the preliminary estimate of 0.0% released earlier in the month and 0.2% decline of November. Despite the increase the annual rate dipped to 0.1%, the lowest level seen since October 2009. Elsewhere CPI in Italy was confirmed at 0.0% in the year to December, unchanged from initial estimates.

Indian wholesale price inflation rose by 0.11% in the 12-months to December. The reading was higher than the flat reading of November but below expectations for an increase of 0.61% with a 5.2% increase in food prices, up from 0.6% previously, slightly overshadowing a 7.8% drop in fuel prices which dipped further following a 4.9% decline in November.


The Day Ahead (AEDT)

The ASX 200 look set to slide yet again this morning with SPI futures pointing to a decline of 21pts on the open. Expect a volatile, skittish session given what was witnessed overnight. To me most interest will yet again be in the resources and energy space with copper falling a further 5% overnight while crude jumped by a similar margin. Will the recovery in crude entice renewed buying or just act as a catalyst to spur on another wave of selling pressure? Your guess is as good as mine today.

The AUDUSD has recovered overnight having fallen heavily in Asian trade with the pair currently fetching .8147. While there will be other factors at play, movements in crude oil futures just to name one, the domestic unemployment data released at 11.30am should largely determine which direction the Aussie travels in today. Given it remains a sell-on-rallies prospect at present it will take an unbelievably-strong data set, something the ABS have been known to produce on occasion over the course of 2014, to see initial gains held for the entirety of the session. Conversely, should the data come in mixed or unilaterally-weak, expect the pair to succumb to yet another wave of selling pressure. Support emerges at .8140, .8100, .8085 and .8065 with resistance kicking in at .8170, ahead of .8200 and again at .8255.

Australian unemployment statistics for December will be released at 11.30am this morning. Markets are looking for net job growth of 3.8k, down from 42.7k in November, with both the unemployment and participation rates expected to hold steady at 6.3% and 64.7% respectively.

Regional data releases today include machine orders and corporate goods price inflation in Japan, the latest REINZ house price index from New Zealand along with Singaporean retail sales. On the Central Bank front the Bank of Korea announce their January monetary policy decision – no change is expected. Later in the evening we’ll also receive producer price inflation, initial jobless claims and manufacturing activity gauges from New York and Philadelphia in the States along with Eurozone international trade.

Bank of America, Citigroup, Blackrock and Intel headline tonight’s US Q4 earnings calendar.


Market Map Jan 15 2015


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