OVERNIGHT DATA AND HEADLINES
• U.S. consumer spending slowed further in January, with sales at clothing stores declining by the most since 2009, a trend that could raise concerns about the economy's ability to continue expanding at a moderate pace. Retail sales excluding automobiles, gasoline, building materials and food services were unchanged last month. Data for December was revised down to show the so-called core retail sales rising 0.2% instead of jumping 0.5% as previously reported. The unchanged reading in core retail sales suggested a further loss of momentum early in the first quarter after consumer spending grew at a 1.8% annualized rate in the October-December quarter. That was a step-back from the 3.2% pace logged in the third quarter.
• Industrial production fell 0.3% in January after decreasing 0.4% in December. Industrial output was pulled down by a 4.0% drop in utilities production. A 7.4% plunge in the production of aerospace and miscellaneous transportation equipment also weighed on industrial output last month.
• Euro zone economic growth slowed as expected in the last three months of 2019 as GDP shrank in France and Italy against the previous quarter, but employment growth picked up more than expected. The European Union's statistics office Eurostat said GDP in the 19 countries sharing the euro expanded 0.1% quarter-on-quarter in the October-December period, as announced on Jan 31, for a 0.9% year-on-year gain - a downward revision from the previously estimated 1.0% growth. The quarterly growth rate slowed compared to the 0.3% expansion in the third quarter because of a 0.1% contraction in the second biggest economy France and a 0.3% contraction in the third biggest Italy. Growth Germany, the biggest euro zone economy, stagnated.
• Euro zone's trade surplus with the rest of the world was 23.1 billion euros in December, up from 16.3 billion a year earlier, bringing the total for the whole of 2019 to 225.7 billion, up from 194.6 billion in 2018. Adjusted for seasonal factors, the trade surplus was 22.2 billion in December, up from 19.1 billion in November as exports rose 0.9% on the month and imports fell 0.7%.
• Global stock markets rose slightly as investors bet on a lull in proliferation of the coronavirus, while oil prices registered their first weekly gain since early January. The S&P 500 ended modestly higher following strong earnings from Nvidia and a report late in the session that the White House was considering a tax incentive for Americans to buy stocks. Dow Jones fell 25 points (0.09%) to 29,398, S&P 500 gained 6 points (0.18%) to 3,380 and the Nasdaq added 19 points (0.2%) to 9,731.
• U.S. DXY index wavered over weaker U.S. data - unable to make further gains dropping to 99.00 lows but back up towards 99.15.
• EUR bounced to 1.0860, fell back to 1.0820 and ended higher to close at 1.0840.
• GBP fell from 1.3063 down towards 1.3000 however ended back up at 1.3050.
• China's CNY weakened over the Friday session, opening at 6.9720 but ending around 6.9860.
• AUD staved off any further falls below 0.6700, trading in and around 0.6705 / 0.6725.
• NZD also traded in a tight 20 point range between 0.6420 / 0.6440.
• AUDNZD reached 1.0455 highs however traded back towards 1.0430.
• AUDEUR fell slightly lower on stronger EUR strength – dropped from 0.6210 towards 0.6180.
• U.S. Treasury yields declined as investors bought safe-haven government debt ahead of a long holiday weekend after soft retail sales data and on continuing caution about the coronavirus epidemic.
• The U.S. 10-year yield was down 3.7 basis points in afternoon trading at 1.58%. The 2 year U.S. Treasury yield was down 2 basis points at 1.42% in afternoon trading.
• Most 10-year bond yields in the euro area were 1-2 basis points lower on Friday, after bleak economic data from Germany added to concerns about the bloc's economic outlook.
• Gold prices rose to the highest level in more than a week, on track for a weekly gain. Spot gold rose 0.53% to $1,584 per ounce.
• China's iron ore futures ended a wobbly session higher and gained the most this week since September amid renewed concerns over seaborne supply and despite demand disruptions due to the coronavirus outbreak. Despite weak demand, spot prices extended gains to hit fresh three-week highs, with the benchmark 62% grade settling at $88.50 a tonne.
• Copper edged lower but remained on track for a second week of gains – Benchmark LME copper closed 0.5% down at $5,760 a tonne but was up about 1.5% over the week.
• Oil prices rose over 1%, posting their first weekly gain since early January. Brent crude rose 98 cents (1.74%) to settle at $57.32 a barrel. It rose 5.23% since last Friday, its first weekly increase in six weeks. U.S. West Texas Intermediate (WTI) futures gained 63 cents (1.23%) to $52.05 a barrel.
ECONOMIC DATA TODAY
• No Australian Economic data today.
• NZ - Jan REINZ house sales (last –1.7%). Jan REINZ house prices %yr (last 6.6%). Due this week. Tight listings are limiting sales while low interest rates are boosting demand.
• Japan - Q4 GDP (last 0.4%, forecast –1.0%). Consumption particularly weak into year end.
• US - Presidents Day - Federal holiday - markets are closed.
AUD rose 0.1% to 0.6725 on Friday after easing 0.3% the previous day as major global currencies wavered after China reported a steep rise in new coronavirus cases and deaths.
Encouragingly, the daily death toll in the Chinese province of Hubei halved on Friday while passengers on a cruise ship blocked from five countries due to virus fears finally disembarked in Cambodia. Whilst easing geopolitical risks and accommodative global policy have been supportive, only a globally synchronous rise in growth would lift the AUD much above current levels. With the coronavirus outbreak expected to hit economic activity in China, the risks to growth was titled to the downside for the first quarter, ANZ added.
For the week, focus will be on the minutes of the RBA Feb meeting (Tuesday) and the Australian January employment data (released Thursday) where a rise in the jobless rate could see the AUD slip lower.
The Reserve Bank of Australia (RBA) is keeping a close eye on the labour force data, saying the case for further policy easing would become stronger if the unemployment rate ticked higher.
A quiet start today with the U.S. out for the Presidents Day long weekend. The week ahead is crucial when it comes to both the monitoring of the coronavirus spread and production resumption across China as workers are expected to slowly return.
Coronavirus fears should continue to see AUD trade with scepticism this week as any headlines will dictate direction. Demand is expected ahead of 0.6700 and if broken towards 0.6670. Selling interest remains at 0.6745.
AUD – steady start as it opens a touch higher this morning as China says rate of new coronavirus cases slow. AUD downside limited by steady RBA.
AUD hovers near 10-DMA support by 0.6717, a fall below eyes 2020 low 0.6657. Support 0.6703-08, 0.6680, resistance 0.6745-50.
A bull run case weak below 0.6845 (50% Fib of 0.7032-0.6657) & multiple DMA area. RSI’s remain poised higher for eventual gains.