US retail sales rise in October

The value of US retail sales rose 0.4% m/m in October, lower than the upwardly revised 0.8% rise seen in September. Much of the strength in October was however driven by automotive sales, excluding which retail sales grew by a more moderate 0.1% m/m. Of the 13 retail categories, 8 saw gains on the month, with the largest rise seen in the electronics and appliances category, potentially pointing to solid momentum going into the holiday season. Separately, US industrial production declined 0.3% m/m in October, following a 0.5% fall the month prior. The outturn was impacted by both the recent Boeing strike and hurricanes Helene and Milton, dampening factory activity.

The UK economy shrank 0.1% m/m in September, down from a 0.2% m/m expansion in August. This left the first estimate of Q3 UK GDP growth lower than expected, rising just 0.1% q/q, down from the 0.5% q/q growth recorded in Q2. The weaker-than-expected growth was largely driven by the services sector, with a sizeable drop in the Information and Communication sector. There was also unexpected weakness in UK industrial production, which fell 0.5% m/m in September, after rising 0.5% m/m in August.

Chinese activity data in October was mixed. Retail sales saw a sharp uptick, rising 4.8% y/y, up from 3.2% in September, significantly higher than consensus expectations for growth of 3.2%. Much of this was however likely driven by a consumer trade-in program, aimed at appliances and cars, which is due to expire soon. Industrial production grew 5.3% y/y, down marginally from 5.4% the month prior, and below expectations for a rise to 5.6% y/y. Residential real estate remained a key concern, with property investment falling 10.3% y/y YTD, declining further from the -10.1% y/y YTD print seen in September.

Today’s Economic Data and Events

• No significant data releases

Fixed Income

• Moves in US Treasury yields were mixed on Friday. Yields on the 2yr UST fell 4bps to 4.3033% on the day but were 5bps higher on a week-on-week basis. The 10yr yield ended the day broadly unchanged but was 13bps higher relative to the week prior, at 4.4394%.
• European Bond markets were also mixed at the end of the week. The 10yr UK Gilt yield fell 1 bps to 4.4706%, while the 10yr German Bund rose 2bps to 2.354%.

FX

• The dollar spot index was broadly flat, against a basket of peer currencies on Friday, gaining just 0.01%. After a series of strong gains in previous days, the index nonetheless ended 1.6% higher on a week-on-week basis. EURUSD rose 0.1% to 1.054, while GBPUSD dropped 0.38% to 1.2618. USDJPY fell 1.26% to 154.3.
• Moves in commodity currencies against the dollar were mixed on Friday. AUDUSD rose 0.12% to 0.6462, NZDUSD gained 0.27% to 0.5866, and USDCAD increased by 0.21% to 1.409.

Equities

• US equity markets continued to move lower on Friday, with investors reassessing prospects for how quickly the Fed might cut rates, after Jerome Powell suggested the central bank was in no hurry. Both the S&P 500 and NASDAQ saw their biggest weekly declines since September this week. The S&P 500 fell 1.32% on Friday, and just over 2% week-on-week. The NASDAQ declined 2.24% on the day, leaving the index 3.2% lower on a weekly basis. The Dow Jones fell 0.7% on the day, ending the week 1.24% lower.
• Similarly, European markets were also weaker on Friday. The Eurostoxx 50 fell 0.8%, the CAC 40 declined by -0.58% and the DAX was 0.27% weaker. The FTSE 100 fell by a more marginal 0.09% on the day.
• Local markets rose on Friday, with the DFM up 0.2% and the ADX 0.25% higher.

Commodities

• Oil prices fell on Friday, ending a three-day rally. Brent futures declined by just over 2% to 71.04/b, while WTI fell 2.45% to USD 67.02/b.