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Retail sales fell in December

Australia: 

Retail sales fell by 0.1% in December, the weakest monthly result since July.  Annual growth eased to 3.0% and remains well below the 10-year average of 4.3%.  

In addition to the monthly retail sales turnover, the Bureau of Statistics released the quarterly retail sales volumes data, which exclude the impact of prices. 

This data told a more encouraging story, with an increase of 0.9% in the December quarter. 

However, the healthy rise in volumes was helped by price discounting, suggesting retailers' margins are under pressure.

ANZ job ads jumped 4.0% in January, after falling by 2.2% in December. For the year to January, job ads rose by 7.1%, up from 3.7% in the year to December.

The Melbourne Institute gauge of inflation lifted by 0.6% in January, following a rise of 0.5% in December.  For the year to January, inflation rose by 2.1%, up from 1.8% in the year to December.

Share Markets:

Investors became more cautious overnight, as uncertainty over the political environment in the US and Europe grew. 

Overnight, the Dow Jones closed 0.1% lower and the S&P500 dropped by 0.2%.

Interest Rates:

The more cautious mood boosted demand for US Treasuries.  Therefore, yields (which move inversely to price) fell by 5bp on both the US 2-year and 10-year notes.

German 10-year bund yields also fell, from 0.43% to 0.36%.  In contrast, the French 10-year bond yield rose from 1.08% to a 17-month high of 1.16%. 

The latter has been unnerved by far right candidate Le Pen's recent promise to exit the Eurozone and hold a referendum on EU membership.

Foreign Exchange: 

The US dollar index was fairly stable. EUR/USD fell from 1.0775 in the Sydney afternoon to a low of 1.0706 overnight, then ground back to 1.0750. 

GBP/USD dipped to 1.2428 in sympathy, before trimming to 1.2470. 

The safe-haven yen was the best performer; USD/JPY fell from 112.60 through 112.00 in a sudden slide in the New York afternoon, to touch as low as 111.63.  This rate was the weakest since late November.

AUD/USD was quiet in the London morning, but then suffered from global nerves, falling to 0.7630 in the New York morning before rebounding to 0.7660.  NZD/USD is flat on the day at 0.7320, but at one point slipped to 0.7285. 

AUD/NZD probed slightly lower to 1.0460.

Commodities: 

Oil prices dropped, as the US dollar advanced overnight and the revival of US shale drilling boosted the country's production outlook. 

Gold, on the other hand, surged to the highest in more than two months due to investor wariness over the possible impact of Trump's policies.

China:  

The Caixin services PMI eased to 53.1 in January, from 53.4 in December. 

The index remains above 50 signalling expansion in services sector activity in January, although at a slightly slower pace than in December.

Europe:

German factory orders surged 5.2% in December, well above the estimate of 0.7%.  It was the largest monthly increase since July 2014 and signals a pickup in business spending and overall activity at the turn of the year.

United States: 

No major data to report.

Topics:  economy retail st george economics



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