Friday, January 17, 2020

Robust retail sales in the US lifts fears from Target’s disappointing holiday sales

Tags
  • Dollar
  • Euro
  • Stocks
  • US Retail Sales
  • US earnings' season
  • European Central Bank

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Market Recap: Robust retail sales in the US lifts fears from Target’s disappointing holiday sales

Stocks in the US extends gains to continue record streak. Headline retail sales data met economists’ estimates on Thursday, growing 0.3% MoM in December while retail sales excluding auto and gas sales beat economists' estimates to grow at 0.5% MoM. The robust data helped lift worries after Target Corp posted disappointing holiday sales. But while consumer spending seems robust, the main driver of the dataset was holiday spending, which grew at the third lowest pace of the decade at 3.8% YoY. Morgan Stanley's stock surged 6.61% after posting better-than-expected quarterly earnings and revising its outlook to be more optimistic.

Indexes Change (%) Net Change Closing Price
Dow Jones 0.92% 267.42 29,297.64
S&P500 0.84% 27.52 3,316.81
Nasdaq 1.06% 98.44 9,357.13
*Source: Bloomberg

The forex market was relatively mixed on Thursday, with most major currencies weakening against the dollar, although sterling and the kiwi strengthened against the greenback. In the EU, the ECB's December monetary policy meeting minutes mentioned very little of its upcoming framework review. In terms of policy outlook, the meeting minutes was in line with expectations as officials viewed the EU's economy as bottoming out and hinted that policy is unlikely to change in the near future. The euro inched 0.12% lower against the dollar, although it was likely more due to the dollar strengthening thanks to the strong retail sales data.

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Demand for safe haven assets fell as reduced geopolitical risk sends capital flows to riskier assets. Gold, yen and US Treasuries all fell on Thursday. Benchmark 10-year yields gained 2bps to 1.81%.

Safe Haven Assets Change (%) Net Change Closing Price
Gold -0.24% -3.74 1,552.51
Silver -0.34% -0.06 17.87
JPY -0.24% -0.26 110.16
*Source: Bloomberg
US Treasury yields Change (bps) Yield (%)
2-Year 1 1.57%
10-Year 2 1.81%
30-Year 2 2.26%
*Source: Bloomberg

Oil futures surged on Thursday, as oil traders expect the US-China phase one trade deal to help refuel global business sentiment which in turn will drive demand for oil. Brent crude oil futures rose 0.97% and the WTI crude oil futures jumped 1.23%.

Oil Futures Change (%) Net Change Closing Price
Brent Crude 0.97% 0.62 64.62
WTI Crude 1.23% 0.71 58.52
*Source: Bloomberg

Stocks in Asia look set to track US gains. The Nikkei and KOSPI started Friday's trading session 0.71% and 0.60% higher. Asia's investors will likely be focused on data releases in China later today.

Asia Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index 0.61% 146.10 24,079.23 8:06:35 AM
KOSPI Index 0.61% 13.71 2,261.76 8:26:30 AM
ASX200 Index 0.53% 37.32 7,079.10 8:26:35 AM
Hang Seng Futures 0.30% 87.00 28,982.00 2:59:58 AM
*Source: Bloomberg

Expect a busy week for financial markets next week. Earnings season continues, notably with United Airlines, Netflix, Johnson & Johnson, P&G, Intel and Amex reporting their quarterly earnings next week. The ECB and BoJ are set for their first monetary policy meeting for 2020. The PBoC will decide on its 5-year and 1-year LPR on Monday morning, while the BoJ and ECB are set for their first monetary policy meeting for 2020 on Tuesday and Thursday respectively.

Economic releases for the day include (all timings in GMT +8):

  • China Dec GDP (10am)
  • China Dec Industrial Production (10am)
  • Eurozone Dec Inflation Rate (CPI) (Final Est.) (6pm)
  • US Consumer Sentiment Index (U. of Mich) (11pm)