US retail sales underwhelmed for a second-consecutive month in January with a decline of 0.8% reported. The fall, coming on the back of a 0.9% contraction in December, was below expectations for a decline of 0.5%. Excluding auto purchases sales also disappointed, falling 0.9% compared to estimates for a drop of 0.4%, while core sales, that which excludes auto and gas expenditure, rising 0.2% against forecasts for an increase of 0.4%.

US initial jobless claims bounced last week, rising to 304k from 279k reported previously. While below expectations for an increase to 285k the series 4-week average, a better gauge on the overall trend, fell to 289.75k from 293k seen previously.

Hostilities between Ukraine and Russia ‘may’ be about end with Russian Present Vladimir Putin announcing a ceasefire beginning February 15 had been agreed to overnight. Full details of the deal can be found here. In corresponding news, and possibly a consequence of former, Ukraine also agreed to new bailout package with the IMF overnight. The $17.5b programme will replace existing funding arrangements, $4.5b which has already been paid out, with the IMF’s total commitment to the nation now standing at $22b.

Sweden’s Riksbank cut interest rates unexpectedly during their February policy meeting, slicing their key repo rate to -0.1% from 0%. Alongside that decision the Bank also announced that they will purchase SEK 10bn worth of government bonds with maturities between 1 to 5 years. In a sign that this may not be the last policy easing they also stated that ‘to ensure that inflation rises towards the target, the Riksbank is prepared to quickly make monetary policy more expansionary, even between the ordinary monetary policy meetings, should the need arise’.

Inflation and economic growth to accelerate. That was the outlook offered by the Bank of England in their quarterly inflation report overnight with the Bank offering a slightly more-hawkish tone than that what was expressed in November. Annualised inflation is expected to rise 1.96% in 2016, up from 1.8% in November, with that rate expected to quicken to 2.15% by the end of 2017. Wages growth is expected to increase 3.5% in 2015 before accelerating to 4.0% in both 2016 and 2017, some 0.25% higher than what was envisaged in November, with GDP now tipped to expand 2.9%, 2.9% and 2.7% respectively over the next three years, higher than the 2.6% level seen previously. The Bank see downside risks to their forecasts from weaker global growth and lower inflation expectations, something that could be counteracted by cutting the bank rate or increasing asset purchases should the need arise, while upside risks stem from increased economic activity as a result of recent falls in energy prices.

Eurozone industrial production held steady in December, thwarting expectations for an increase of 0.2%. Despite the miss the annual rate improved to -0.2% from -0.8% in November. A 1.8% contraction in non-durable consumer goods was enough to offset growth in all other survey components.

German consumer prices fell by 1.1% in January, steeper than the 1.0% decline reported previously, with the annual rate also revised lower to -0.4%. Using EU methodology prices fell by 1.3% leaving the annual rate at -0.5%, unchanged from the preliminary estimate.

Greek unemployment held at 25.8% for a second month in November. Approximately 1,229,367 persons were classified as unemployed, an improvement on the 1,336,860 figure recorded a year earlier.

Canada new home prices rose 0.1% in December, in line with expectations and unchanged from November, with the annual increase also holding steady at 1.7%.

Indian consumer prices edged higher in the 12 months to January with an increase of 5.11% reported. The reading was higher than the 5.0% pace of December but below expectations for an increase to 5.4%. Elsewhere industrial output rose 1.7% in the year to December, weaker than the 3.8% rate of November but ahead of expectations for an increase of 1.6%, with a contraction in mining output offsetting slower growth in manufacturing and electricity production.


The Day Ahead (AEDT)

The ASX 200 looks set to snap its four-day losing streak this morning with SPI futures pointing to a gain of 30pts on the open. While profit-taking in higher-yielding sectors has been prevalent in recent sessions following a record-breaking run from late January, the only way this will continue today, in my opinion at least, will be if RBA Governor Glenn Stevens attempts to correct market expectations for further interest rate reductions ahead. This isn’t what I’m expecting, nor the markets, and will see yield plays come under pressure should it eventuate. However, in what is a far more likely scenario, should he do nothing to correct the markets view expect to see a renewed bid across these sectors on the belief that domestic rates will indeed be ‘lower for longer’.

The AUDUSD has rallied hard overnight, firstly on reports the Bank of Japan may not add to existing policy easing, something that saw the USD come under initial pressure, and secondly on further sub-standard economic data released in the US overnight. Having bottomed out at .7645 following yesterday’s weak unemployment print the pair rose as high as .7778 before easing fractionally into the close. Today, like equities, the tone of trade will likely be set by RBA Governor Glenn Stevens’ appearance before policymakers this morning. Markets will be expecting a dovish, jawboning-riddled performance from the Governor, something that does create upside risks for the pair today should it not eventuate. Support is found at .7730, .7700 and .7650 with resistance located at the overnight high, .7800 and again at .7840.

RBA Governor Glenn Stevens will appear before the House of Representatives Standing Committee on Economics from 9.30am this morning. With markets pricing in further rate cuts following the RBA’s move in February expect this event to create a bout of short-term volatility, particularly should he attempt to correct market expectations for interest rates or the Australian Dollar.

Data releases this evening include import prices and University of Michigan-Thomson Reuters consumer survey from the States, GDP figures from the Eurozone, Germany, France, Italy and Greece, Spanish CPI, French non-farm payrolls, German wholesale price inflation along with UK construction output.


Market Map Feb 13 2015


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