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Although Japanese markets were closed, bonds were heavy and yields continued to push higher in Asia. Despite a mild dip ahead of US trading, yields remained firm.
US 10yr yield threatened a push towards 4.35% but remain slightly firmer on the day at around 4.33%.
Chinese stocks stuttered in into their midday before grinding small gains into their close (Shanghai Comp. +0.55%). More broadly, stocks have remained steady, though have failed to mirror the gains seen in US markets.
ASX managed a gain of +0.43% with European stocks hovering slightly up on the day.
FX ranges were very contained in Asian trading with a slight lift in AUD now being joined by GBP.

There were no data releases in AU, but NZ 4Q real retail sales saw a sharper than expected slide of -1.9%q/q (est. -0.2%q/q) and the eight consecutive quarterly drop in volumes of retail sales.

Domestic media point to this as a clear signal that policy is performing and is important ahead of next week’s RBNZ MPS/OCR even if they also cite yesterday’s RBNZ Household inflation expectations survey ticking higher.

Westpac previews the RBNZ meeting and outline the basis for the house view of maintaining rates unchanged at 5.50% through 2024 whilst acknowledging risks.

Chinese markets struggled to sustain gains into the weekend as regulators voice their intent to eliminate fraud in markets whilst also aiming to support confidence.
China’s house price data for January showed a moderation in the pace of decline, but the data are still showing declining prices and have increased calls for yet further support measures.

Although UK GfK February consumer confidence dipped (-21, est. -19, prior -18) it has been firming for a while and would be better described as consolidating with optimism holding firm. T

Germany’s Final take on 4Q GDP remained at -0.3%q/q but showed an uncomfortable slide in CAPEX (-1.9%q/q, est. -1.5%q/q and 3Q was marked down to +0.1%q/q from +0.6%q/q) and sluggish private consumptions (+0.2%q/q as expected).

Germany’s Feb IFO report provided little for markets to trade on with an expected Climate read of 85.5 (prior 85.2) with Current assessment 86.9 (est. 86.8) and Expectations of 84.1 (est. 84.0).

ECB’s January Consumer Expectations Survey (CES) saw CPI expectations a tad firmer after their recent pullbacks with 1yr ticking up to 3.3% from 3.2% in Dec. and unchanged at 2.5% for 3yr (est. 2.4%)

ECB speakers (notably Schnabel and Nagel) have sung from the same hymnbook of warning against early easing and the need to see further information before discussing easing, though hawkish Holzmann did suggest that they may ease into mid-year but that they would not act outside or ahead of any moves by Fed.

Solid US yields (10yr currently flat at 4.32%, 2yr at 4.72%) have been dragged to unchanged by slippage in 10yr Bund yields, sliding from an early test of 2.48% to be -2.5bps at 2.415% (2yr -2.5bsps at 2.88%, down from 2.95%) with 10yr Gilt yields -1bp to just under 4.10% and 2yr -3bps at 4.57%.
USD is soft but little changed.
AUD and GBP are +0.25% at 1.2690 and 0.6575 with NZD clawing back to 0.6200 (+0.1%). EUR is little changed and mid-range for the day t 1.0840 as is JPY at 150.45 (back from tests of 150.75).

DAX and FTSE 100 are eking out mere +0.1% gains with CAC 40 ticking up +0.65%. US futures are around +0.2%.

The light week for data ends with little in US of note and no scheduled Fed speakers.

Next week will have a distinct focus on inflation (AU monthly indicators for CPI, preliminary CPI levels being released across Eurozone and PCE updates in US) as well as RBNZ’s key MPS/OCR meeting.

We Get

AU: 4Q Const. Work & Jan. CPI Indicator (28^th), Retail Sales & Private credit (29^th), CoreLogic Hse. Px. & (F) Manu. PMI (1^st), MI Infl. Gauge, 4Q Inv./Profits & Bldg. Approvals (4^th) 4Q C/Acc. (5^th), 4Q GDP (6^th)

NZ: RBNZ OCR & MPS (28^th), ANZ Biz. Outlook (29^th), CoreLogic Hse. Px., ANZ Cons. Conf., Bld. Consents & RBNZ Gov. Orr Speaks (1^st), 4Q ToT (4^th), ANZ Comm. Px. (5^th), 4Q Vol. of Bldg. Work (6^th)

EZ: EZ M3 (27^th), Ge GfK Cons, Conf & EZ Econ./Serv./Ind. Conf. (28^th), Ge Unempl. & Ge CPI (29^th), (F) Manu PMIs, EZ Unempl. & EZ CPI (1^st), Sentix Survey (4^th), (F) Serv. PMI, EZ PPI (5^th), Ge Trade & EZ Ret. Sales (6^th)

UK: CBI Ret. Sales, (26^th), BRC Px. (27^th), Lloyds Biz. Barometer & Cons. Credit (29^th), Nationwide Hse. Px. (tbc), (F) Manu. PMI (1^st), BRC Sales & (F) Sev. PMI (5^th), UK Budget (6^th), DMP Price Expectations (7^th)

US: New Home Sales & Dallas Fed (26^th), Dur. Gds. Orders, FHFA & CoreLogic Hse. Px., Rich. Fed & Conf. Bd. Cons. Conf. (27^th), 2^nd 4Q GDP, Adv. Gds. Trade & Ret./Wholesale Inv. (28^th), Pers. Income/Spending/PCE, Claims, Chic. PMI., Pending Home Sales & Kansas Fed (29^th), (F) Manu. PMI, Manu ISM, U. Mich. Sent. & Infl. Survey (1^st), (F) Serv. PMI, Serv. ISM & Fact. Orders/(F) Dur. Goods (5^th)

Westpac publications

AU & NZ Economics Weekly : Editorial – Why September?
Westpac AU & NZ Economics

Luci Ellis (Standalone) explains the backdrop, influences and risks on both sides around the view that RBA’s first cut will be at their late-Sept. meeting, noting data-dependency.
Cliff Notes (a game of patience) provide context to recent data and the RBA and FOMC minutes which show that CBs are comfortable in awaiting more data before committing to easing.
Updated views and forecasts sit beside data reviews and previews.

Preview of Feb. 2024 RBNZ MPS: Hawkish hold expected.
Kelly Eckhold

Westpac expect RBNZ to leave OCR at 5.50% and maintain a profile for a further lift (perhaps in May), giving more hawkish scenarios a probability of 25%.

NZ Weekly Economic Insight Video : Staying the course.
Kelly Eckhold

This week’s first Economic Overview for 2024 is highlighted and profiles of both households and businesses bunkering down and what path interest will take through the year.
Economic rebalancing should see a flat economy, a tougher labour outlook and declining inflation but policy kept unchanged to ensure that inflation continues towards 2% next year.
Agricultural outlooks are improving from 2023 but are only looking for a return to profitability in the sector rather than a stellar performance.

NZ 4Q 2023 Real Retail Sales : A much weaker than expected end to 2023.
Satish Ranchhod

Nominal sales fell -1.5%q/q and so volumes fell a much deeper than expected -1.9%q/q (Westpac f/c -0.5%q/q, mkt. -0.2%q/q) for a volume decline over the year of -4.1%y/y.
Weakness was widespread, especially in interest sensitive areas. Despite the notable rise in population, household spending is being squeezed (per capita real spending -6.7%y/y.
Implications for current forecasts of a soft +0.1%q/q for 4Q GDP with be reviewed with other 4Q data releases, but consumer activity is expected to remain weak during 2024.

Energy Market Report : Macro drivers and price developments in energy markets.
Robert Rennie

Disruptions across Red Sea, Black Sea and Baltic Sea and inventory slippage have been offset by global supply seen as surpassing demand with demand losing momentum.
Crude prices have therefore been capped and not pushed range resistance as had been expected. Although upside potential is still projected, further upside caps are likely.

NZ Rates Snapshot - NZGB Issuance Thoughts : Thoughts turn to the next syndications.
Imre Speizer

Following the successful syndication of NZGB 2054, the next syndications of a new 2035 issue and a tap a shorter line are assessed.
Further issuance of NZD14.7bn is due basis HYEFU guidance suggesting around NZD6.5bn of syndication likely outside of weekly tenders into end of June.
Issuance of NZD4bn of 2035s and 2.5bn of shorter bonds therefore is plausible (possibly 2030 or 2031) and most likely in April and May.

AUD vs EUR Snapshot : Corporate focussed one-page snapshot with charts on AUD vs EUR.
Sean Callow

Range trading likely to persist near term but a Fed easing beings (in June?) AUD outperformance should resume for UAD/EUR to 0.62 (EUR/AUD to 1.61).
Improvements in China would be needed for any more substantial outperformance gains for AUD.

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