St George Economics economy and finance update
The US stockmarket was little changed on Friday night, with investors digesting the strong gains of recent weeks.
Sentiment deteriorated somewhat later in the session on a report Walmart had a weak start to February sales.
The Dow and the Nasdaq both rose 0.1%, the S&P500 was unchanged.
US government bonds finished little changed given mixed US economic data and a flat finish for stocks.
Bond prices softened earlier (yields rose) on upbeat US consumer sentiment data, although soft industrial production data and concerns about upcoming fiscal negotiations in the US saw this reverse later.
The Aussie dollar weakened versus the US dollar as risk appetites declined driving safe haven flows into the US dollar.
Comments from RBA Board member Edwards that "the exchange rate is very high...It would be helpful if it was a bit lower" weighed on the currency.
The Aussie dollar hit a two-year low against the New Zealand dollar after New Zealand retail sales surprised on the high side, in contrast to recent retail sales data in Australia.
The Euro gained ground against the Aussie, with comments from Euro zone officials supportive for the currency.
ECB chief Draghi noted signs of stabilisation in the Euro zone and said there was no target for the currency.
The Yen weakened versus the Aussie after concerns the G20 communique could criticise Japan for weakening its currency proved to be unfounded.
Commodity prices weakened, with copper and oil prices declining after a surprising fall in US industrial production raised concerns about demand.
In a speech on Friday, RBA Assistant Governor Kent was quite positive about the outlook for China and longer-term demand for Australian resources in a speech on Friday. He, however, reiterated the uncertainty facing the domestic economy given that mining investment was set to peak this year, and provided a risk to the near-term outlook.
In an interview on Friday, RBA Board member Edwards was wary on the currency, but noted "interest rates for housing are now fairly accommodative', saying "we're seeing house prices increase and quite low rental vacancies and we are seeing quite strong rises in rent, so all of those things normally produce an upswing in housing."
The Euro zone trade surplus widened to €12.0bn in December, from €10.5bn in November, driven by a decline in imports.
Imports fell 3.0% in December. Exports fell 1.8% in December, the sharpest decline since July.
Retail sales volumes rose by 2.1% in the December quarter, beating consensus estimates for a 1.4% rise.
It also followed a revised 0.2% decline in Q3 (previously reported as -0.4%).
Consumers have become more upbeat, reflecting a recovery in housing. Spending was also supported by reconstruction efforts in Christchurch.
The report corresponds with a lift in consumer confidence and points to a pickup in economic activity towards the end of last year.
Retail sales were weaker than expected, falling 0.6% in January as cold weather weighed on sales. This follows a downwardly revised decline of 0.3% in December (previously reported as -0.1%). For the year to January, UK retail sales are down 0.6%.
Michigan consumer sentiment was stronger than expected, rising to 76.3 in February, from 73.8 in January. This was a three month high and comes despite an increase in payroll tax taken out of consumers' take-home pay in January.
Industrial production was weaker than expected, falling 0.1% in January, after rising an upwardly revised 0.4% in December (previously reported as a 0.3% increase)
The New York Empire manufacturing index rebounded strongly, rising to 10.04 in February, from -7.78 in January.
It was the highest reading since May 2012 and signals growth in regional manufacturing activity.
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