It’s been a night again where the market has not had to be besotted with global geo-politics such as Greece and has been able to focus on the flow of data and more reports out of the US earnings season.  None too compelling data, US earnings reports that have failed to inspire the market, and weakness in hard commodities is what’s transpired.

It’s not been a huge night for economic reports.  UK retail sales missed its estimates in June, though there’s still good annual growth evident at 4.2%.  With the market having been bulled up on the positive Sterling story really since the clear outcome from the election, this miss was the trigger for some to take profits on long sterling positions.  Even the AUD/GBP made up some lost ground after the release of the number.

It should have been the opposite for the loonie with Canadian retail sales more than rebounding more than expected in May after a soft April, but continued weakness in the traded commodity complex (oil down further and copper taking more heat) kept the commodity currencies including the loonie on the defensive during the session, USD/CAD trading higher back up through 1.30.

US mostly second tier data reports were generally positive, jobless claims printing much lower than expected in the July payrolls survey week, though they can be volatile at this time of the year owing to car plant shutdowns and re-tooling timetables.  Even discounting this to some extent, the Chicago Fed National Activity Index and the Leading Index reports for June were encouraging and the Kansas City Fed manufacturing somewhat less negative.

These proved only a slight foil to further overall disappointments with the US reporting season, with particular focus on the commodity space, as copper prices took another turn for the worse, down 1.65% on the LME and 2.1% in New York and now off 18% from its recent May high and to the lowest since 2009.  A disappointing report from Caterpillar that cut its full year sales forecasts warning of end user industries remaining weak turned the gloom dial up a little more.  The Materials sector of the S&P 500 fell 1.46%, outpacing the 0.57% decline in the S&P 500.

In FX, the US$ was neither stronger nor weaker as currency pairs were whipped around by the particular news on the night. After an some early session decline (since reversed) in the USD and thus short-lived $A rally, the Aussie has been rather listless, trading if anything lower, not helped by the weakness in hard commodity prices.  The AUD/USD sits in the mid 0.7350s this morning ahead of little data due in the Asia session.  In days ahead, the market will be endeavouring to position into the FOMC next week, the language they use and what that might mean for the odds of a September lift-off.  Market pricing remains split on the prospect of lift-off starting then and thus still prone to the coming data flow.  US GDP is due next week.

Coming up today/tonight

The June NZ trade report is first up this morning with a smaller deficit predicted with the market looking for what the report might say about the local economy as well as any potential sticker shock from the balance itself.  Our BNZ colleagues look for little change in the balance so neutral for the Kiwi.

The preliminary German, French and Euro-zone PMIs are due tonight with no essential change predicted for the key manufacturing components, the EZ index tipped to be steady at 52.5.  The June New Home Sales report is being released with virtually steady sales tipped, despite a stronger NAHB Housing index in June and July.  US housing has been a continued US growth bright spot.

Overnight

Copper takes more heat: Eurostoxx 600 -0.5%, Dax -0.1%, CAC +0.1%, FTSE -0.2%.  Dow -119 points to 17,732, -0.7%, S&P 500 -0.7%, Nasdaq -0.6%, VIX 12.64 +4.3%.  Mumbai +2.4%, Nikkei 225 -0.5% and ASX 200 -0.4%; ASX SPI futures this morning -0.4%.  US bond yields: 2s at 0.69% (-1), 10s at 2.27% (-6).  WTI oil at $48.85 (-0.7%), Brent at $55.51 (-1.1%), Malaysian Tapis (yesterday) $57.98 (-1.1%).  Gold at $1089.10/oz (-0.2%). Base metals: LME copper -1.7%, nickel -0.3%, aluminium -1.4%. Iron ore $51.7/t -0.1% Chinese steel rebar futures +0.5%. Soft commodities spot futures: wheat +0.8%, sugar +1.1%, cotton +0.3%, coffee -2.8%.  Euro Dec 14 CO2 emissions at €8.09/t (1.5%). The AUD/USD’s range overnight 0.7352-0.7418; indicative range today 0.7315-0.7380; the AUD/USD is 0.7353 now

UK Retail Sales (Jun) -0.2% (L: 0.2% ; E: 0.4%); EC Consumer Confidence (Jul) -7.1 (L: -5.6; E: -5.8)

US Chicago Fed National Activity Index (Jun) 0.08 (L: -0.17; E: -0.05); Jobless claims (w/e Jul 18) 255K (L: 281K; E: 280K); Leading Index (Jun) 0.6% (L: +0.7%; E: +0.2%); Kansas City Fed manufacturing (Jul) -7 (L: -9; E: -5)

Canadian retail sales (May) 1.0% (L: -0.1%; E: +0.6%)

For full analysis, download report:

• Markets Today: 24 July 2015 (PDF,KB)

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