US consumer spending remains strong

US retail sales data for December pointed to continued robust consumer spending at the end of the year. While the headline retail sales print came in below expectations, rising 0.4% m/m in December, and weaker than the upwardly revised 0.8% growth seen in November, underlying trends still look strong. In particular, growth in control-group sales – the data used to estimate GDP - saw their biggest advance in 3 months, rising 0.7% m/m.

US initial jobless claims in the week ending 11 January, rose 14k to reach 217k, slightly higher than the 210k expected by markets. Claims are anticipated to rise in coming weeks, in part because of Californian wildfires and measures expected to be taken by Boeing to reduce costs.

UK GDP rose 0.1% m/m in November, up from a 0.1% contraction in October but below consensus expectations for growth to rise to 0.2%. The growth observed in November was concentrated in the services sector, with some activity potentially having been put on hold in October ahead of the budget statement. UK Industrial production fared worse than expected in November, falling a further 0.4% m/m after declining 0.6% the month prior.

Chinese GDP grew 5.4% y/y in the final quarter of 2024, the fastest pace of growth in 6 quarters. That leaves annual growth at the government’s 5% target. The quicker growth seen at the end of the year was likely driven by increased stimulus measures introduced in September. Other data also points to a stronger final month of the year, with December industrial production rising 6.2% y/y and retail sales growing 3.7% y/y. The real estate sector, however, continues to act as a drag on the Chinese economy with property investment recording its worst annual performance since records began in the late 1980s, contracting 10.6%.

UAE-based renewable energy company, Masdar, has signed an agreement with the Philippines Department of Energy to invest USD 15bn in renewable energy projects. These are set to include the development of solar, wind and battery storage systems by 2031.

Today’s Economic Data and Events

• 11:00 UK retail sales (Dec). Forecast: 0.4% m/m
• 14:00 EC CPI (Dec final). Forecast: 2.4% y/y
• 18:45 US Industrial Production (Dec). Forecast: 0.3% m/m

Fixed Income

• US treasury yields fell further on Thursday, with 2yr yields declining by 3bps to 4.23% and the 10yr yield dropping 4bps to close at 4.6125%. Fed Governor, Christopher Waller, suggested that there was still scope for the Fed to cut rates in 2025, including March, depending on the data.
• Bond yields fell across most European markets. The 10yr Bund yield declined 1.5bps to 2.542%. The 10yr UK Gilt yield continued to fall, dropping 5bps to reach 4.677%, with UK growth and inflation data surprising on the downside.  

FX

• The dollar spot index fell for a third day in a row, declining 0.12%, following dovish comments from the Fed’s Christopher Waller which suggested that the central bank could cut by more than markets are expecting. Moves against major peers were however mixed. EURUSD gained 0.12% to 1.0301, while GBPUSD fell just 0.02% to 1.2239. USDJPY declined a further 0.8% to 155.16.
• Commodity currencies were generally weaker against the dollar on the day. AUDUSD fell 0.2% to 0.6213, NZDUSD fell by 0.16% to 0.5607, and USDCAD rose 0.37% to 1.4395.

Equities

• US equity markets saw small losses on Thursday, after Wednesday’s rally, despite solid earnings results from two large banks. The Dow Jones fell 0.16%, the S&P 500 declined by 0.21%, and the NASDAQ dropped 0.9%.
• European equity markets rose strongly, driven by technology and luxury-segment stocks. The Eurostoxx 50 rose 1.5%, the FTSE 100 gained 1.1%, the CAC 40 increased by 2.1% and the DAX rose 0.4%.
• Locally, the ADX fell 0.18% and the DFM declined 0.3%. The Tadawul rose 0.36%.
• Emaar Properties has said that it is in discussion about selling a stake in its operations in India to Adani Group. Emaar has several residential and commercial properties in India.

Commodities

• Oil markets fell on Thursday, following the large gains seen on Wednesday. Brent futures fell 0.9% to reach USD 81.29/b and WTI declined 1.7% to USD 78.68/b.