It has not been a massive night in terms of market direction, the Australian dollar again capturing interest and making some further net gains, if pulling back a little from its intra-session highs into the New York close. The consolidated of some further net gains for the Aussie in the overnight session has been against the backdrop of generally supportive day-to-day market trading metrics. While the spot price of iron ore in China yesterday gave back $1.30/t to $51.20, LME base metal prices overnight gained another 1% (copper up 1.36%, nickel up 3.15%), gold is up 1.47% to $1260.20, while the S&P 500 VIX volatility index is currently trading at 16.34, the lowest level seen since the start of the year. Oil prices were again little changed, as are US Treasury bond yields while the major US stock market indexes are trading close to flat, trying to rally into the close.

The AUD/USD has traded up into the high 73s and is currently at 0.7355/60 after yesterday’s better-than-expected international trade report and ahead of this morning’s January retail sales where the market is looking for the re-emergence of some growth.

US economic data was broadly in line with expectations.  Weekly jobless claims printed at 278K for the last week of February (after 272K last week) while the US non-manufacturing ISM index for February came in at 53.4, only a fraction better than the 53.1 expected but coming with a sting, softness evident in the employment component which fell to 49.7 from 52.1 ahead of tonight’s payrolls.

The Bloomberg spot DXY index is softer by 0.5% this morning, losing against the commodity currencies have also a little against the mainstream majors, seemingly on the absence of major direction from the scheduled data.

Robert Kaplan, Dallas Fed President (a non-voter this year) has been speaking, urging caution from the Fed. “While I believe that excessive accommodation carries a cost in terms of distortions and imbalances in hiring, asset allocation and investment decisions, I also believe that, at this juncture, the Fed needs to show patience in decisions to remove accommodation. “This is particularly true in light of key global secular trends as well as recent developments relating to slowing global economic growth and tightening financial conditions.”

Coming Up

For the for the local market today, it’s pretty much all about retail sales for January and whether the flat result for December was the odd man out or the start of a flattening out in retail spending around the turn of the year.  NAB’s forecasts call for a rise of 0.3%, immaterially shy of the market’s 0.4% consensus.  Also on the watch list, for yen followers, is Japan’s labour cash earnings for January and whether it could be perky enough to suggest any uplift in wages and helping the monetary authorities avert deflationary risks.

Then it’s on to tonight’s payrolls report for February and what that report says of 1) the state of labour demand from the employment component 2) how much spare capacity there is in the US labour market and the economy in general from the readings of the unemployment rate, the under-employment rate and of course in secondary market reading such as earnings growth.  The report is still expected to be pretty solid overall with a near 200K print in employment expected (195K consensus), an unemployment rate of 4.9% and further growth in average earnings, by 0.2% for steady annual growth of 2.5%.

The focus over the weekend then shifts to China with the official announcement of its growth aspirations and its specific target for 2016 and the country’s 13th Five Year Plan for 2016-20. China met last year’s target of “around 7%” with actual growth of 6.9%.  A target for this year of 6½-7% was apparently adopted (but not disclosed) in December and looks set to be announced.

Overnight

On global stock markets, the S&P 500 was +0.20%. Bond markets saw US 10-years -1.39bp to 1.83%. On commodity markets, Brent crude oil +0.51% to $37.12, gold+1.6% to $1,261, iron ore -2.5% to $51.20. AUD is at 0.7357 and the range was 0.7282 to 0.7374.

For full analysis, download report:

• Markets Today: 4 March 2016 (PDF, 1MB)

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