U.S. equity markets were little changed on Friday following disappointing sales data that missed expectations. U.S. advanced retail sales, which makes up roughly one third of consumer spending in the U.S., missed expectations of a 0.4% increase from June instead remaining flat at 0% growth month on month. This adds further weight to the view that the Fed will not hike rates anytime soon despite recent strong gains in non-farm payroll data, the U.S. Dollar index declined -0.14%, the S&P 500 declined -0.08% while the Nasdaq 100 gained +0.08%.
Further data in the U.S. showed that business inventories increased slightly more than expected month on month in June, unchanged at 0.2% against forecasts for a decline to 0.01%, declines in business inventories are seen as positive for economic growth as stockrooms are emptied therefore needing to be replenished and triggering higher production overall. A monthly consumer confidence survey from the University of Michigan also missed expectations declining to 90.4 against expectations of 91.5.
The weaker U.S. dollar helped oil prices move higher with both WTI & Brent crude oil up +2.30% & +2.02% respectively. Copper declined -2.26% shown on the first chart below, following weaker than anticipated Chinese data on Friday and a change last week for a net short position on futures by hedge funds and money managers. Natural gas prices gained +1.37% on hotter weather in the U.S. and iron ore futures finished relatively unchanged, up just +0.17%. Despite the weaker USD precious metals spot gold and Silver declined -0.2% & -1.20%.
Key Chinese data was released on Friday, with industrial production (YoY Jul) declining to 6% against forecasts to remain unchanged at 6.2%, retail sales (YoY Jul) also declined to 10.2% against expectations of 10.5% and fixed asset investments excluding rural (YoY Jul) declined to 8.1% against estimates of 8.9%. Aggregate Yuan financing (MoM Jul) was 487.9b against forecasts for 1024.0b and new yuan loans (MoM Jul) also missed with a reading of 463.6b vs 900b.
While these results are not the most encouraging we have seen recent signs of stabilisation in China over the past few months, following better than expected wholesale prices earlier this week and stable CPI and more stable moves in the CNY. This is likely to be a continuing theme in data from China as the economy continues to transition away from one that is led by investment growth to one based on consumption. This is not an easy feat for policymakers and undoubtedly we will see some swings in the data, but overall the longer-term picture is becoming more encouraging of late despite the disappointing data on Friday.
European equity markets were generally lower on Friday as Euro-zone GDP (YoY Q2) remained stable at 1.6% as forecasts at 0.3% quarter on quarter in line with estimates. Meanwhile industrial production increased to 0.4% (YoY Jun) from 0.3%. The Euro Stoxx 600 declined -0.16%, as did the DAX30 -0.27% as the Euro gained +0.23%. Elsewhere the FTSE100 was flat, up just +0.02% while the FTSE250 gained +0.64% as the GBP/USD fell -0.28%.
Locally the S&P/ASX 200 closed +0.42% higher while the market looks set for a softer open with ASX SPI200 futures down 11 points.
Data releases:
- Japanese GDP (QoQ Q2) 9:50am AEST
- Japanese Industrial Production (YoY Jun) 2:30pm AEST
- U.S. NABH Housing Market Index (MoM Aug) 12:00am AEST
This article was written by James Woods - Global Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via james.woods@rivkin.com.au or by phoning +612 8302 3600.