Retail spending is on the up, but not by much

Australia: 

RETAIL spending rose a disappointing 0.3% in January to be up 4.0% over the year. 

The 10 year average for annual growth in retail spending is 4.5%. Annual sales growth was strongest in the ACT (8.5%) and weakest in Western Australia (1.2%). 

A pick-up in retail spending will require ongoing solid job growth and would be assisted by firmer wages growth, a declining unemployment rate and possibly by a lower household savings rate.

Share Markets:

A STRONGER than expected US payrolls report lifted sentiment on Friday night, providing some impetus to equities. A rise in the oil price was also supportive for the stockmarket.

The Dow rose 0.4%, the S&P 500 gained 0.3% and the Nasdaq edged up 0.2% for the session.

Interest Rates: 

US government bond yields rose, with the positive impact from a strong rise in non-farm payrolls muted by a decline in wages for the month.

The US 10-year government bond yield rose 4 basis points to 1.87%, while the 2-year government bond yield rose 2 basis points to 0.86%.

Recent volatility in German bond yields continued as investors speculated on the degree of monetary easing they expect from the European Central Bank this week.

The German 10-year bond yield rose sharply on Friday night, retracing Thursday's decline.

Australian bond yields (implied by futures) also rose on Friday night, following the move in US bonds.

Foreign Exchange:

The US dollar index weakened overnight, despite the lift in payrolls, with a fall in wages allaying investor concerns about Fed rate hikes.

The British pound gained ground as concerns over a potential "Brexit" eased. GBP/USD rose from 1.4186 on Friday morning, to trade at 1.4218 at the time of writing.

The Euro also gained ground against the US dollar, with EUR/USD rising from 1.0963 on Friday morning, to 1.099 this morning.

The Yen weakened against the US dollar, with improved risk appetites leading to a reversal of safe haven flows.
Improved risk appetites boosted the Aussie dollar which rose from 0.7361 US dollars on Friday morning, to 0.7408 this morning.

AUD/USD hit an eight-month high of 0.7443 on Saturday morning.

Commodities:

The oil price rose US$1.40 to US$35.90 per barrel, boosted by strong US jobs growth and a lower US oil rig count.

China: 

China's National People's Congress announced a new GDP growth forecast of 6.5 to 7 percent in 2016, down from the 2015 forecast of about 7 percent.

It is aiming for consumer inflation of around 3 percent in 2016. The government budgeted a 2016 fiscal deficit of 3 percent of GDP (a record), up from a budgeted 2.3 percent in 2015. Premier Li warned that "downward pressure on the economy is increasing."

Europe:

The Eurozone Markit retail PMI rose to 50.1 in February, from 48.9 in January.

United States:

Non-farm payrolls rose by 242k in February, beating consensus expectations for an increase of 195k.

Additionally, payrolls in the previous two months were revised up by a net 30k. The unemployment rate held steady at an eight-year low of 4.9%, as expected, with more job seekers entering the labour market.

The workforce participation rate rose to 62.9% in February, from 62.7% in January.

The only disappointing part of the economic data was average hourly earnings, which slipped 0.1% in February, after rising 0.5% in January.

For the year to February, average hourly earnings increased by 2.2%, down from a pace of 2.5% in the year to January. The average workweek fell to a two-year low of 34.4 hours in February, from 34.6 hours in January.

The US trade balance widened by more than expected, to a deficit of US$45.7bn in January, from a deficit of US$44.7bn in December. In January, imports slipped 1.3%, while exports fell by 2.1%.