Retail growth isn't strong, but it's there.
Retail growth isn't strong, but it's there. Claudia Baxter

Retail sales still growing, just slowly

Australia:  

Retail sales rose at a moderate 0.5% pace in October, following two consecutive months of growth at 0.6%.

It saw the annual rate steady at 3.5%, a reasonable pace of growth, but the annual pace of growth remains below par. 

We may need to see a sustained pickup in household spending if economic activity is to pickup as forecast by the RBA. 

Low interest rates and ongoing rising house prices will support spending. 

However, there are limits to how much household spending is likely to pick up given the current weak pace of wage growth and recent softening in labour market conditions.

Europe:  

The results from the Italian referendum on constitutional reform should become available today. A "no" vote is likely to lead to the resignation of Italian Prime Minister Renzi. Voting closes at 9am AEDT, with Renzi due to speak around 10am AEDT.

Share Markets: 

The US payrolls data on Friday night was mixed and slightly disappointing overall.

The data provided little direction to the sharemarket, with the Dow fallilng 0.1%, the S&P 500 finishing little changed and the Nasdaq edging up 0.1% for the session.

Interest Rates: 

US bond yields fell following the payrolls release. Yields on the 10-year government bond fell by 6 basis points to 2.38%.

Yields on the 2-year government bond fell by 5 basis points to 1.10%.

The payrolls data wasn't disappointing enough to dissuade investors from pricing in a rate increase this month. Pricing in the Fed fund futures still sits at 100% for a December hike. 

Foreign Exchange:

The US dollar index (weighted against a basket of currencies) is 0.3% lower from Friday morning.

The Euro initially weakened against the US dollar, but then rebounded following the US payrolls.

EUR/USD fell from 1.0690 to 1.0630 before rebounding to 1.0685 post-payrolls.

Austria voted for a Green Party-backed independent president, beating the populist candidate by a decent margin.

Markets now await the Italian referendum result. The US dollar lost ground against the Yen. USD/JPY fell from 114.21 to 113.25.

The Australian dollar strengthened against the US dollar following the payrolls. AUD rose from 0.7401 on Friday afternoon, to 0.7469 early Saturday morning. NZD/USD rose from 0.7086 to 0.7149. AUD/NZD fell from 1.0475 to 1.0420.

Commodities:

The oil price continued its upward trajectory following last week's OPEC deal. The WTI oil price rose by US$0.60 to US$51.70, its highest price in over a month. The iron ore price edged higher, but failed to match the recent highs hit earlier last week.

United Kingdom:  

The Markit/CIPS construction PMI edged up to 52.8 in November, from 52.6 in October. The index is further above 50 signalling more rapid expansion in UK construction activity in November.

United States: 

The increase in US payrolls in November was in line with consensus expectations, rising by 178k.

This followed a downwardly revised increase of 142k in October (previously reported as a 161k increase).

The two big surprises in the payrolls data were the fall in the unemployment rate and contraction in earnings for the month.

The unemployment rate (which is from the separate household survey) fell to a nine-year low of 4.6% in November, from 4.9% in October.

The underemployment rate also fell to 9.3% in November, from 9.5% in October. The workforce participation rate slipped to 62.7% in November, from 62.8% in October.

Average hourly earnings were softer than expected, falling by 0.1% in November. For the year to November, average hourly earnings rose by 2.5%, down from an increase of 2.8% in the year to October.

The New York ISM business conditions index rose to 52.5 in November, from 49.2 in October. The increase in the index to above 50 signals expansion in business activity in the region.



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