- Strong US retail sales suggest that consumers have ignored recent tax hikes so far. USD stronger but overall limited market reaction.
- Norges Bank is expected to remain on hold and signal unchanged rates for the rest of the year.
- Growth strategy and bailout for Cyprus is expected to top EU-summit's agenda starting today.
Yesterday’s strong US retail sales data suggest that consumers have more or less ignored the recent tax hikes. Real personal consumption in February appears to have been broadly unchanged relative to January, which is a positive surprise as US consumers were hit by both tax increases and higher gasoline prices. So far, Q1 private consumption is tracking growth around 1.5% q/q annualised in a very challenging quarter.
Strong retail sales data have been moderately positive for risk sentiment. However, most markets have been largely trading sideways since market close in Europe. The US stock market closed slightly higher with S&P 500 finishing up 0.1%. Not surprisingly, retailers outperformed the overall market on the back of the strong data. Asian stock markets are mixed this morning with Japan’s Nikkei up 0.7% and Shanghai recovering 0.7% after the dismal performance in recent days. Most other Asian stock markets are moderately lower.
US bond yields increased moderately yesterday after the release of the retail sales data but have edged slightly lower again in Asian trade. 10-year US treasury yields are down about 2bp to 2.03% since market close in Europe.
In the FX markets, USD strengthened across the board on the back of the strong US retail sales data but it has been largely range-trading since market close in Europ. EUR/USD is this morning trading largely unchanged at 1.295. The Japanese Lower House this morning approved Haruhiko Kuroda as new Bank of Japan governor. The two nominated deputy governors were also approved. This was no surprise as the government has a solid majority in the Lower House. The Upper House, where the government does not have a majority, will vote tomorrow but the candidates are expected to be approved here as well. USD/JPY is trading largely unchanged at 96.0. AUD has overnight strengthened on the back of a strong labour market report that showed strong gains in employment in February. AUD/USD is this morning trading 1.03.
To Read the Entire Report Please Click on the pdf File Below.