Further weakness in oil prices, a more settled Chinese renminbi and a solid US July retail sales report caught the market’s attention overnight.  News of disruption to the major Chinese port of Tianjin after the explosion Wednesday has not so far affected the outlook for iron ore prices too much.  BHP reported that its discharge berths were unharmed by the explosion; Rio saying they are re-directing six fully-laden vessels.  Wire reports suggest that alternative supply ports can be used.  Dalian iron ore futures prices closed virtually flat (+0.13%) after opening stronger earlier in the day.  The spot price of Qingdao cif 62% fines iron ore price rose $0.71 to $57.02/t.

US retail sales in July rose 0.6%, right in line with expectations, though upward revisions to July sweetened the in-line headline growth, the report confirming that consumer spending has made a solid start to this quarter and delivering an upward revision to Q2 growth.  Even so, the Atlanta Fed’s GDPNow real time estimate of Q3 US GDP was revised down to 0.7% from 0.9% a week ago.  They upped their estimate of consumption for the quarter to 3.1% from 2.9% after retail sales but this was more than offset by a larger growth drag from inventory adjustment now estimated at -2.2% points for Q3, from their previous -1.8% estimate.  On the price side, falling July import prices was a reminder of the deflationary impact from the dollar and oil.

Oil-linked currencies were lower, the oil market fretting over excess supply.  The AUD eased somewhat on net, remaining settled, opening this morning toward the higher end of its overnight range.  After the previous 24 hours of gyrations in the CNY from PBoC intervention to arrest its expected decline and keep the market guessing day to day, the CNY has been steady overnight ahead of this morning’s fix.

Coming up today/tonight

First up today is NZ Q2 retail trade volumes due at 8.45 AEST.  Our BNZ colleagues look for retail sales volumes to have eked out a small 0.2% gain. It might not sound like much, but following the sky-scraping 2.7% Q1 expansion, any growth at all in Q2, even a small negative, would be very commendable.

Then it will be China watch again with the CNY fix from 11.15am.

At 12.10 AEST we have the RBA’s Chris Kent, Assistant Governor (Economics), speaking on Recent Labour Market Developments, a very topical subject and point of interest for  the market and local analysts including any observations from Martin Place on the state of the labour market, the extent of labour slack and any implied fallout for monetary policy.  Expect to hear inevitable official caution about putting too much weight on recent ABS labour force reports and the need to monitor a wide array of information.  We’ll be on the look-out for any summation of labour market conditions and what it says about the state of the economy.

The main interest tonight data-wise in Europe is the June quarter GDP reports, the market expecting growth for the single currency zone to continue at a 0.4% rate, lifting annual growth from 1.0% to 1.3%.  German, French, Italian, and Dutch GDP reports are all due.  Despite the anxiety over Greece, the Eurozone economy has been making consistent progress for 9-12 months now, aided by the weaker Euro, lower energy prices and for some peripheral economies such as Ireland and Spain, seeing post-bail out growth return at a so-far faster than expected rate.  Greece actually reported positive 1.5% y/y growth in Q2 ahead of the bail-out anxiety and its new reform program implementation.

In the US tonight is PPI, Industrial Production and the preliminary UoM Consumer Sentiment report for August.  The market is expecting IP to have grown 0.3% and Sentiment to have been broadly steady in August.  Given the US stock market’s push lower into August, some dip in Sentiment would not surprise.

Overnight

Oil prices down again; WTI making a new low: Eurostoxx 600 +1.0%, Dax +0.8%, CAC +1.2%, FTSE -0.0%.  Dow +6 points to 17,408, +0.0%, S&P 500 +0.0%, Nasdaq -0.1%, VIX 13.49 -0.9%.  Mumbai +1.8%, Nikkei 225 -0.2% and ASX 200 +0.1%; ASX SPI futures this morning -0.1%.  US bond yields: 2s at 0.71% (4), 10s at 2.19% (+4).  WTI oil at $42.24 (-2.4%), Brent at $49.23 (-0.9%), Malaysian Tapis (yesterday) $52.02 (+0.8%).  Gold at $1114.10/oz (-0.8%). Base metals: LME copper -0.1%, nickel -1.4%, aluminium -0.9%. Iron ore $57.0/t +1.3% Chinese steel rebar futures -0.2%. Soft commodities spot futures: wheat +2.2%, sugar -0.5%, cotton +1.7%, coffee 4.0%.  Euro Dec 14 CO2 emissions at €8.20/t (0.0%). The AUD/USD’s range overnight 0.7323-0.7370; indicative range today 0.7320-0.7380; the AUD/USD is 0.7358 now

US Retail Sales (Jul) 0.6% (L: -0.3%, revised up to flat; E: +0.5%); Initial Jobless Claims (w/e) 274K (L: 270K; E: 270K); Business Inventories (Jun) 0.8% (L: 0.3%; E: 0.3%); Import prices (Jul) -0.9%/-10.4% (L: 0.0%/-9.9%; E: -1.2%/-10.7%; Canadian New House price index (Jun) 0.3%/1.3% (L: 0.2%; E: 0.1%)

For full analysis, download report:

• Markets Today: 14 August 2015 (PDF, 344KB)

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