Risk Assets Extend Slide

 

Retail Data Disappoints

Sales at US retailers unexpectedly declined for a third consecutive month during February.  Overall retail sales fell 0.1% (+0.3% expected) last month, albeit January’s reading was upwardly revised to -0.1%.  Declines were recorded in 7 of the 13 major retail sectors, with gas stations (-1.2%) and auto dealerships (-0.9%) experiencing the largest pullbacks in sales. Core retail sales, which excludes autos, gasoline and construction materials, rose 0.1% on the month, missing expectations of a 0.4% increase.

 

 

Other key economic data included February’s producer price index, which reflected steady inflationary growth in the prices received by domestic producers of goods and services.  The 0.2% monthly increase beat market expectations of +0.1% and was a mild downturn from January’s +0.4%.  Much of the rise was attributed to increasing costs of services, namely lodging, passenger flights and telecommunications. The core PPI also exceeded median forecasts, reported at +0.4% MoM.  Looking at producers’ inflation over the past year, overall producer prices have increased 2.8% while core prices have risen 2.7%.  

 

 

Risk-Off Today

Financial markets were in risk-off mode during today’s trading session.  All three major US stock indices finished in the red today, with the DJIA (-1%)  the worst performer on lower than expected retail sales numbers and assumption that consumer spending is slowing down.  Treasurys rallied again today, as yields/swap rates declined an additional 1-3bps across the curve, bringing the 10-year note yield to 2.82%, the lowest level since March 1, 2018.  In commodities, WTI crude futures rose nearly 0.3% to $60.88/barrel on the news of decreasing gasoline inventory, even in the face of larger than expected increases of crude oil inventory.  Bitcoin was down another 10% today to the lowest level of the past month on news that cryptocurrency advertisements would be banned from Google.  This was the second such ban following Facebook’s ban of cryptocurrency advertisements in January of this year.  In traditional currency trading activity, the USD posted small gains vs the Euro (EUR) and British Pound (GBP) and small declines vs the Swiss Franc (CHF) and Japanese Yen (JPY) .

 

 

Mr. Kudlow Goes [Back] to Washington

Lawrence “Larry” Kudlow was appointed by President Trump to be Assistant to the President for Economic Policy and Director of the National Economic Council, replacing outgoing Director Gary Cohn.  This will be the second time Kudlow is working in the White House, having previously served under President Reagan in the Office of Management and Budget (OMB) as an Associate Director for Economics and Planning.  Of the potential candidates for the position, Kudlow would be perceived as a moderating voice within the Trump administration.  Peter Navarro, current Assistant to the President on Trade and Industrial Policy and Director of the White House National Trade was allegedly also considered for the position.  Kudlow ascending to this position over Navarro seems to be a victory for a free market economic voice in the administration.