European shares end the day in the red

German DAX, -1.1%. France’s CAC, -0.3%. UK’s FTSE 100, -0.5%

The major European shares are ending the day in the red. The declines were led by the Italian and German markets. The provisional closes are showing
  • German DAX, -1.1%
  • France’s CAC, -0.3%
  • UK’s FTSE 100, -0.5%
  • Spain’s Ibex, -0.4%
  • Italy’s FTSE MIB, -1.2%
in the European debt market, the yields are ending mostly lower with UK yields down 5 basis points to leading the way. Italian yields are the only country with higher rates today. They rose by 1.1 basis point.

German DAX, -1.1%. France's CAC, -0.3%. UK's FTSE 100, -0.5%

In other markets as London/European traders look to exit
  • spot gold is trading down nearly $20 at $1774. The low price reached $1769.65 as flows followed the dollars movements (as the US dollar moves higher, the price of gold tends to move to the downside).
  • Spot silver is down $0.11 or -0.39% at $27.12
  • WTI crude oil futures are trading up $0.15 or 0.25% $60.20. It has had a volatile run falling from a high of $61.26 to a low of $59.43 on the back of a Wall Street article saying that Saudi Arabia was looking to rollback the voluntary production cuts.
  • Bitcoin is trading up by $2497 or 5.13% at $51086.  The high price reached $51,717.88

US dollar strengthens after sizzling retail sales report

EUR/USD falls, near 1.20

The US dollar is near the best levels of the day right across the board after January retail sales rose 5.3%, blowing away expectations for a 1.1% gain.
EUR/USD has been a chief loser in the move, falling 30 pips to 1.2030. The pair hasn’t fallen below 1.20 since February 4.
EUR/USD falls, near 1.20
Other moves are more-modest with the US dollar rising around a dozen pips.
The moves would be larger but there are some automatic stabilizers built into the market. The thinking is that strong data diminishes the need for fiscal stimulus from Congress. So while consumers are better off now, they might not be getting as much help later.
I think this doesn’t change the playbook for Congress so it’s ultimately going to be good for the dollar and equity futures, so long as the Fed doesn’t waiver in its belief that high spring/summer inflation will be temporary.

US PPI final demand for January 1.3%% vs. 0.4% estimate

US PPI data for January 2021

  • Final demand MoM 1.3% vs. 0.4% estimate
  • Ex Food and energy 1.2% vs. 0.2% estimate
  • Ex food and energy, trade 1.2% vs. 0.2% estimate
  • Final demand YoY 1.7% vs. 0.9% estimate
  • Ex food and energy YoY 2.0% vs. 1.1% estimate
  • ex food, energy, trade YoY 2.0% vs. 1.0% estimate
Producer price inflation numbers much higher than expected which will get the market thinking that the wholesale inflation would push into the consumer price data. US stocks are lower with the NASDAQ down around -67 points (as implied by the futures). The Dow industrial average has also moved lower after trading higher. Yields have also moved back toward unchanged level and the longer end.

US January advance retail sales +5.3% vs +1.1% expected

US January 2021 retail sales data:

  • Prior was -0.7% (revised to -1.0%)
  • retail sales ex auto +5.9% vs +1.0% expected
  • retail sales ex auto and gas +6.1% vs +0.8% expected
  • retail sales control group +6.0% vs +1.0% expected
Prior numbers and revisions

  • December retail sales ex auto revised to -1.8% from -1.4%
  • November retail sales ex auto and gas revised to -2.5% from -2.1%
  • November retail sales control group revised to -2.4% from -1.9%

Huge beats on retail sales. Those stimulus checks work. There are some minor negative revisions to the prior but they’re eclipsed by the big beats on the headline.

German health minister says that data shows virus variants are spreading quickly in Germany

Comments by German health minister, Jens Spahn

  • New UK variant now makes up for more than 20%
  • But infections are still decreasing despite higher proportion of new variants
  • 10 million vaccine doses will be delivered next week
  • More deliveries mean that pace of vaccinations can speed up significantly
Although the virus situation in Germany is taking a turn for the better, lawmakers remain guarded on the spread of virus variants and medical capacity.
For now, the lockdown is extended to March but we’ll see in the coming weeks how the situation develops and if the government feels that enough progress is made to relax restrictions a little ahead of Easter.
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