Headlines

* US retail sales unexpectedly surged in July, jobless claims fall again

* US Treasury yields jumped as 50bp Fed September rate cut bets were pared

* Walmart lifted its annual profit forecast as consumers sought bargains

* The VIX, Wall Street’s “fear gauge” fell for a sixth straight day to 15

FX: USD jumped on a few US data points which were stronger than expected. Strong retail sales signalled resilient consumer spending, easing fears of any imminent recession in the world’s biggest economy. Weekly initial jobless claims figures also quelled fears about the employment picture. Yields rose with the 10-year US Treasury up above 3.9%, having sunk to 3.66% on Manic Monday last week. There is now only a 25% chance of a 50bp September rate cut, down from over 60% a week ago.

EUR pulled back below 1.10 as the dollar went bid on the solid data. There was little news out of the bloc. The euro economy is still struggling at the moment with Germany suffering and a rebound in China missing.

GBP outperformed in the G10 space after the in-line GDP Q2 results boosted the view the UK economy has incurred a solid first half of 2024. Cable set highs of 1.2871 but pulled back and still can’t settle above resistance at 1.2865.

USD/JPY burst higher after consolidation which proved bullish. Treasury yields popped higher and risk sentiment was relatively buoyant. The next major upside level is the 152 barrier.

AUD performed strongly on much better-than-expected employment data, while the jobless rate surprisingly ticked higher, albeit as the participating rate too surprisingly surged higher. The 50-day SMA is capping the upside at present at 0.6635.

US Stocks: US markets saw strong gains as solid data helped the soft-landing theme. There are now around 94bps of rate cuts priced in for 2024, versus the 105bps pre-data. The benchmark S&P 500 closed up 1.61% at 5,543. The tech-laden Nasdaq 100 finished higher by 2.46% at 19,490. The Dow Jones settled 1.39% up at 40,563. Consumer discretionary rebounded strongly and was the leading sector, up over 3.3%, with tech adding over 2.5%. Real estate was the only sector in the red. It was the sixth straight day of gains for the S&P 500 and Nasdaq. Both these indices last seven-day win streaks led up to their July peaks. Walmart beat expectations. Nvidia rose over 4% higher with the Blackwell GPU delay said to be manageable according to reports.

Asian stock futures are in the green. Asian stocks shrugged off a subdued day Stateside. The ASX 200 moved higher again on strong jobs data while investors also digested earnings releases The Nikkei 225 was among the biggest gainers after GDP data topped estimates and showed a return to growth. The Hang Seng and Shanghai Composite made gradual gains. Chinese activity data was mixed as industrial production disappointed, but retail sales topped forecasts.

Gold had a whippy day but held support around $2431 and edged up just over 0.3%. This came in spite of a strong dollar and yields.

Day ahead highlight – UK Retail Sales

UK retail sales have had a weak couple of years as demand has focused on services. Despite some recovery, the data has also been volatile, as it has historically known to be. More recently, the bad weather in the UK had for much of the first half of the year literally dampened sales activity. That said, July is forecast to be better. The post-election change in mood, plus improved weather and the closing stages of the Euro football tournament in which England again reached the final, is likely to have boosted sales a bit.

GBP is on track to stop a fifth consecutive weekly loss in cable. Sterling is top of the G10 currency charts this week even though some CPI data came in softer than expected. The key services inflation numbers have been noisy with hotel prices spiking higher and lower, while wages still remain sticky. The BoE are more likely to keep rates unchanged next month, according to money markets.