U.S. equities were mixed while Treasury yields rose on Thursday following varied retail sales data for July and August as well as initial jobless claims increasing, breaking a streak of declines.
Retail sales for the month of August surprised to the upside, rising +0.7% vs estimates for a -0.7% decline providing some relief to concerns of an economic slowdown, although the figures do not include two-thirds of consumer spending which relates to services. While the beat is positive, the July figures were revised lower from -1.1% to -1.8% consistent with the impact of the Delta variant seen in restrained restaurant spending and online sales. A measure excluding auto sales which have been impacted heavily due to the effects of the pandemic rose +1.8% beating estimates of 0% although the July figure was also revised lower from -0.4% to -1.0%. Elsewhere, initial jobless claims rose for the week to September 11th up +332k vs +322k forecast from a slightly revised higher +312k the prior week. Business inventories were in line with estimates at +0.5% from a prior revised +0.9% and tonight we’ll get a look at the preliminary consumer sentiment for September.
The S&P500 swung between gains and losses before closing -0.16% lower weighed by industrials -0.66%, health care -0.25% and materials -1.09%. The Dow Jones also closed -0.18% lower, the Russell 2000 edged -0.07% lower while the Nasdaq Composite rose +0.13% and the VIX gained +2.81% to 18.69. Treasury yields were higher following the economic data with the 2-year up +0.8 basis points to 0.219% with both the 10 and 30-year yields also rising +3.9 and +2.4 basis points to 1.338% and 1.883%. A modest rise in breakeven inflation rates pushed real yields across 5 and 10-years +3 and +2.9 basis points higher respectively, with the U.S. dollar index gaining +0.35%.
European equities rose with the Euro Stoxx 600 up +0.44% lifted by industrials +1.35%, financials +0.78% and technology +0.76%. Leisure and travel stocks rose +3.4% after low-cost carrier RyanAir lifted its long-term traffic forecast with the stock rising +7.9% also lifting rivals EasyJet and WizzAir by +7.35% and +5.15% in London. European equity benchmarks were broadly higher with the DAX gaining +0.23%, as did the CAC +0.59% and FTSE100 +0.16%. Both the Euro and Pound weakened -0.42% and -0.33% against a stronger USD ahead of inflation data for the Eurozone tonight at 19:00 AEDT forecast to show core prices rose +1.6% for the year to August from +0.7% previously.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX looks set to open on a weaker note this morning with ASX200 futures down -18 points, or -0.24% to 7,424. The index rose +0.58% on Thursday boosted by financials +0.86%, health care +0.91% and industrials +0.78% while consumer discretionary was the only negative sector, down -0.05% after disappointing employment data. Employment dropped -146.3k in August surpassing estimates for a -90k decline. Meanwhile, the unemployment rate unexpectedly declined to 4.5% from 4.6% previously, missing estimates for a rise to 5%. While this would usually be a reason to celebrate, the decline does not reflect a strong labour market, rather a decline in the participation rate by -0.8% to 65.2% as well as hours worked declining -3.7% due to the impact of locked-down regions. The underemployment rate better reflects the underlying situation, rising to +9.3% from +8.3% in July. The Australian Dollar declined -0.56% to 0.7292 while the yield on 10-year government bonds rose +5.5 basis points to 1.263%.
WTI crude was unchanged overnight at US$72.61 while Brent crude rose +0.23% to US$75.63. Iron ore futures continued to weaken after Chinese regulators were said to include more cities in its pollution targeting campaign. Iron ore futures in Singapore fell -6.96% on Thursday and are trading a further -4.63% lower this morning at US$102.40 having traded as high at US$203 in July. Gold and silver came under pressure against higher real yields and a stronger USD with gold declining -2.25% to US$1,753.77 and silver falling -3.92% to US$22.91. Bitcoin weakened -1.65% to US$47,149.
- Eurozone Inflation (YoY Aug) 19:00
- U.S. Michigan Consumer Sentiment (MoM Sep) 00:00
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
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