Equities at record highs
US Retail Sales on deck
Nikkei 0.07% Dax -0.06%
UST 10Y 1.79%
Europe and Asia:
USD Retail Sales 8:30
Risk was bid in European trade today with US equity indices making fresh record highs in overnight futures trading while commodity currencies firmed with both Aussie and Kiwi getting a boost as the night wore on.
There was no major economic news in Asia or Europe and FX was content to tread water with investor sentiment remaining positive in the wake of the signing of the US-China phase 1 trade deal. One of the more interesting developments in FX is the muted action in USDJPY which so far is refusing the participate in the risk rally with the same type of enthusiasm as equities. The pair has broken the 110.00 barrier this week, but further upside has been limited as US yields remain depressed as well.
The risk-on rally continues to be driven by purely monetary factors as Fed’s easing policy continues to support as frothy speculative flows. The fundamental data in the US, however, continues to diverge with the lastest ISM and NFP numbers showing growth to be muted. That’s why today’s US Retail Sales release could be of particular interest to the market.
The big bet by the bulls is that the consumer will sustain and reaccelerate the growth rebound in the US this year, but so far the data from retailers has been less than impressive with Target just the latest company to show lackluster spending in Q4. The market anticipates a 0.5% rise in core sales today vs. 0.1% the month prior, but Retail Sales have missed expectations for the past 6 months running, so if the consumer comes up short most of the risk flows from overnight trade could quickly unwind on concerns that forward demand is just not there.
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