Despite the lacklustre retail figures over the Xmas period and the harsh (and very wet) weather experienced in January and February in the UK, retail sales have posted a very healthy increase in the latest print, courtesy of the UK’s official stats body the ONS. The monthly figure was a very credible 1.7% increase, whilst the year on year increase was 3.7%. In terms of costs the deflation was around 0.2%, overall this is now the strongest series of growth figures since 2007. The effect on cable was immediate with price breaching R1 and pausing before reaching R2.
In other news the IMF have agreed to step in and agree loans to Ukraine, this will replace the working capital loans required after the interim govt. cut their ties and agreements with Russia. Russia will presumably now recoup their lost loan money by squeezing the Ukraine’s price for oil and gas therefore the majority of the loans will end up in the coffers of Russia’s leading energy suppliers such as Gazprom. Check mate.
From Europe this morning we received the latest data on consumer and business loans and it would appear that the appetite for debt is still stagnant, loans to the private sector fell by 2.2% in February. Although a lower impact news release this news will eventually filter down into consumption and production figures to be published over the coming months and year.
UK Retail Sales, February 2014
Year-on-year estimates of the quantity bought in the retail industry continued to show growth. In February 2014, the quantity bought increased by 3.7% compared with February 2013. On the month the quantity bought increased by 1.7%. The three month on previous three month movement in the quantity bought showed continued growth for the twelfth consecutive period increasing by 1.6%. This has been the longest period of sustained growth since November 2007. The average prices of goods sold showed deflation of 0.2% compared with February 2013 with fuel providing the greatest contribution falling by 4.4%.
Euro zone private sector loans contract further in Feb
Lending to households and firms in the euro zone shrank further in February and money supply growth remained subdued, adding to the European Central Bank’s list of concerns ahead of its policy meeting next week. The ECB has cut interest rates close to zero, pumped extra liquidity into the banking system and announced a fresh government bond purchase programme, but the measures have so far not managed to unclog lending to the real economy. Euro zone inflation is also running far below the ECB’s target of just under 2 percent, hitting 0.7 percent in February. Loans to the private sector fell by 2.2 percent in February.
IMF Announces US$14-18 Billion Ukraine Stand-By Arrangement
An International Monetary Fund (IMF) mission worked in Kyiv during March 4-25, to assess the current economic situation and discuss the authorities’ economic reform program that could be supported by the IMF. At the conclusion of the visit, Nikolay Gueorguiev, Mission Chief for Ukraine, issued the following statement today in Kyiv: “The mission has reached a staff-level agreement with the authorities of Ukraine on an economic reform program that can be supported by a two-year Stand-By Arrangement (SBA) with the IMF. The financial support from the broader international community that the program will unlock amounts to US$27 billion over the next two years. Of this, assistance from the IMF will range between US$14-18 billion, with the precise amount to be determined once all bilateral and multilateral support is accounted for.
Market snapshot at 10:00 am UK time
Certain Asian stocks posted declines, with the exception of Japanese equity indices, after the US hinted at more sanctions against Russia, and the Federal Reserve further unnerved investors by rejecting five banks’ capital plans. The ASX 200 closed down 0.50%, the CSI 300 down 0.71%, the Hang Seng down 0.24%, the Nikkei closed up 1.01%. Currently euro STOXX is up 0.12%, CAC down 0.03%, DAX up 0.09%, FTSE down 0.36%.
The DJIA equity index future is up 0.23%, SPX future up 0.22% and the NASDAQ future up 0.26%. NYMEX WTI oil is up 1.00% at $100.18 per barrel with NYMEX nat gas down 0.50% at $4.38 per therm. COMEX gold is down 0.33% at $1299.10 per ounce with silver down 1.68% at $19.64 per ounce.
Forex focus
The kiwi added 0.8 percent to 86.60 U.S. cents early in London, after earlier touching the highest since April 11th at 86.62. It has climbed 5.4 percent this year, the most among 16 major currencies.
Australia’s dollar gained 0.1 percent to 92.38 U.S. cents from yesterday, when it reached 92.45, the highest since Nov. 22nd. The currency is up 3 percent over the past month.
The yen slid 0.1 percent to 102.16 per dollar, after earlier touching 101.72, the strongest since March 19th. Japan’s currency lost 0.1 percent to 140.82 per euro after strengthening to 140.27, a level not seen since March 5th.
The dollar fetched $1.3783 against its European peer. It gained 0.4 percent over two days to $1.3781 yesterday, paring a drop this quarter to 0.3 percent. The New Zealand dollar reached an 11-month high and Australia’s currency extended gains versus most major peers amid signs of resilience in the South Pacific nations’ economies.
Bonds briefing
Treasuries were little changed, with the benchmark 10-year yield at 2.70 percent early in London. That’s still less than the average over the past decade of 3.46 percent. The price of the 2.75 percent security due in February 2024 was 100 13/32.
Yields were 2.26 percent for seven-year notes and 3.56 percent for 30-year bonds. The extra yield investors get for buying the longer maturity narrowed to 1.27 percentage points earlier this week, the smallest amount in four years. Treasury seven-year notes were among the world’s worst-performing government securities before the U.S. sells $29 billion of them today.
