Morning Market Wrap: U.S. equities mixed on retail sales, ASX to open lower as iron ore weakens

17 Sep 2021
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.

Economic data:

  • 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.



You need to be a Premium user to comment on this post. Click here and become premium now!

Anthony D.

Hi, I am interested in your thoughts on Redcape hotels (RDC), particularly in relation to their proposed delisting and the proposed buyback.



Anonymous User

Hi, interested in your view on Strategic Elements (SOR), had gone up to 97c, now trading around 50c

Gobind D.

I am intersted in your opinion regarding GEM, ABClearning child care centre

John R.

As a blue sky punt, what do you think of Latrobe Magnesium Ltd. Just trying to get my crystal ball in sync with the future of battery technology!

Agustin Benitez

Hi John! Your question will be answered on the next Virtually Live to be published on Thursday, 5pm AEDT. Thanks!

Fred M.

Hi I just wanted to know your opinion about the effect of when the job keeper payments finish will have on the market? Regards Fred

Shannon Rivkin

Hi Fred,

To some degree, I think the market is anticipating an impact from the end of Jobkeeper and, on the back of the commentary from the banks, is pricing in some caution but how big an impact it has will play a role. We are definitely wary of this period but feel the banks are best placed to judge the future impact with the ongoing dialogue with their business and home loan customers. So, overall I would say we’re cautiously optimistic that the program has been successful and the economy can be weaned off it.

Shannon Rivkin

Anonymous User

Sbm will be able to cross it’s historical high of 6 ? After all the price and production is getting better and when it was 6 it had much less to offer. Comments please!

Oliver Gordon

Hello, I get highs of around $5 a share from both July 2018 and February 2019. The share price has rallied quite a bit over the past 3-4 months, and with resistance at $4, not far above current levels, I would be surprised to see prices just continue higher at the recent pace. Also, what the gold price does from here will have a large impact. The price has recently gone to new all time highs above US$1960 an ounce, however it appears sentiment is getting very bullish at the moment, which often occurs closer to the end than the… Read more »

Riki S.

Hi Oliver – nice article.

As long as the US has a dysfunctional approach to virus reality and subsequent management, the economic risks are significant. There’s a complete and utter disconnect between the US equity market and the real economy, regardless of the typical forward looking perspective. The market sentiment is emotive, better to look at what’s happening in the bond market for something that is likely to resemble the underlying forward impact – if they push through recent low levels, then watch the …. hit the fan!

Brian S.

Why has ZEN dropped so much today? Doesn’t their latest report show that take over is still proceeding with the offer of $1.01 ?

Daryl L.

I bought more at this price Last Week! Good opportunity to park some $s for a Great return. VL recently confirmed this.

Shannon Rivkin

Hi Daryl,

Completely agree with you! Should be a stress-free parking spot.


Shannon Rivkin

Hi Brian,

I’m sorry I’m only getting back to you now as this question somehow slipped through the cracks. The short answer is that we have seen risk spreads blow out across all arbitrage investments. I don’t think this means the bid is less likely to go through but rather that the return required from investors is higher for their capital investments. The conditions attached to the deal look likely to be satisfied, so we remain happy for members to buy/hold at current levels.

Shannon Rivkin

Anonymous User

Hello Shannon,, the banks stocks,, why have been in downtrend for nearly 5 years now?? Wespac example.. .. what is your opinion please?? target

Agustin Benitez

Your question will be answered on Virtually Live this Thursday.
Thanks for your submission!

We are glad you liked it

For your convenience, this will appear under your Saved articles in the top menu.