In this section, we look at the economic news affecting global markets this week.


  • Retail sales fell -0.5% m/m in December which was below expectations (consensus -0.2% m/m). This poor result offset what was a bumper sales result for November +1.2%. The annual pace of sales slowed to 2.5% from 2.9%. The December fall was the largest in percentage terms since August. Household goods retailing fell (-2.6%) and other retailing (-1.8%). Department stores fell 0.6%. The only gain came from food retailing which rose 0.7%. It’s a bit of a negative for Aussie retailers that were banking on a positive retail sales result heading into reporting season.
  • Australia has slipped to a $1.36bvn trade deficit from a surplus of $36m in November. The consensus was for a surplus of $200 million. It’s a heavy deficit driven by a surge in imports. Exports were up by $510m led mainly by an increase in iron ore and coal shipments. But it wasn’t enough to offset imports of $1.9bn which came from a massive increase in oil imports, machinery and equipment. This is however the sign of healthy domestic demand.
  • The forecast for the Dec Quarter current account deficit is a widening from -2.3% to -2.8% of GDP.
  • The Australian Industry Group Performance of Construction index rose by 1.5 points to 54.3 in January. Above 50 signifies expansion or growth of activity.
  • Construction wages rose by 0.4 points to 64.3 in January, above the 12-month average of 63.4.


  • US Nonfarm payrolls rose by 200,000 in January which beat analyst expectations of 180,000. The unemployment rate held steady at 4.1%. But the biggest highlight of the day was that average hourly earnings increased 2.9%. This was the biggest gain since the early days of the recovery in 2009. Bond yields rose on the back of this report. The benchmark 10-year yield rose to 2.83% a four-year high. The idea that interest rates are now going to rise due to inflation pressures was the catalyst the market was looking for to sell.
  • The market is now almost entirely confident that the US Federal Reserve will raise rates in March by a quarter-point which is tied to most consumer rates like credit cards and adjustable-rate loans. The market expects another in June and a third by the end of the year, according to the CME’s calculations of action in the fed funds futures market.
  • The payroll numbers come amid an expected acceleration in growth for the U.S. economy. The Atlanta Federal Reserve is expecting a GDP gain of 5.4 percent in the first quarter, which would be the best increase since the recovery began in mid-2009.


  • The Bank of England upgraded its 2018 GDP growth forecast to 1.8% from 1.6% and left its 2019 and 2020 forecasts unchanged at 1.8%. It has priced the chances of a May interest rate rise at 68% up from 55% before the BoE meeting and press conference. An interest rate rise by August is 82%.


  • Chinese exports held up despite a stronger yuan and rising tensions with US. Exports were up 0.6% in January whilst imports rose 30.2%. That left a trade surplus of 135.8 billion yuan ($21.6 billion).
  • Factories and offices will be closed for the Lunar New Year which hits February 15-21. The Chinese New Year of 2018 starts on February 16th and lasts until March 2nd. The disruption is huge. It affects all production and many importers are caught off guard. Factories completely shut down without exception. But on the flip side, Chinese New Year is a massive tourism expedition. China’s tourism industry saw revenues of 423.3 billion yuan ($61.55 billion) during last year’s Lunar New Year festival.