Stronger than expected U.S retail sales data and corporate earnings spurred a moderate risk-on environment overnight, with the Aussie dollar and Kiwi leading risk currency gains. Markets found solace in the latest retail sales data which rose 1.1 in September against expectations of a 0.8 percent rise. Positive revisions from July to August were also look upon favorably with a rise of 1.2 percent from the originally report 0.9 percent gain. Better than expected earnings from bellwether Citibank also helped investors to look at the bright-side. The S&P500 crossed the finish line 0.8 percent higher on the day. Recent session have seen markets positioned for less than encouraging third quarter earnings season, increasing the change of upside surprises. Negating some of the more positive themes was reports that talks between Greece and the Troika won’t be concluded before the European Summit this week. Nevertheless, the euro remained steady on speculation Spain will seek a bailout in early November.
Local markets will now focus on the release of the RBA October meeting minutes due for release at 11.30 AEST, which saw Stevens and Co, cut 25bps from the official cash rate. True to form, investors will be looking closely for any sign the bank may follow-up with a November rate cut, in-turn a key directive for the Aussie dollar. Money markets have been quick to price in near certain odds of a Melbourne Cup day rate cut, but despite the statements lack of colour, there’s little to suggest the RBA will begin a series of cuts. The final paragraph sums it up nicely noting the board considered it appropriate for the policy to be “a little more accommodative.” It is also clear the bank has been afforded the necessary “scope” to embark on further easing initiatives given subdued domestic inflation, which is expected to be backed up with next week’s consumer price data.
Should the data pulse both locally and abroad continue to display tentative signs of improvement, the RBA will have little cause to take preemptive action. November’s meeting may see the board acknowledge domestic data points showing modest employment growth, stronger housing data and growth in other big-ticket item sales such as yesterday’s rise in new vehicle sales. According to data released over the weekend, China’s export-reliant economy has also begun to show signs of life. Exports from the region climbed 9.9 percent in September from 2.7 percent in August, while imports return from negative growth to rise 2.4 percent after a 2.6 percent fall in August. China recorded an overall trade surplus of $US27.67 billion in September from a previous $US26.66 billion. Economist’s anticipated a surplus of $US20.54 billion. Greater export growth signals an increase of foreign demand as central Banks from Europe and the US embark on new easing initiatives, while a return to positive import growth is a particularly good sign domestic demand is returning from sub-par levels.