AUSTRALIA DATA: Consumers Price Sensitive But Will Spend
June retail sales rose a stronger-than-expected 0.5% m/m driven by mid-year sales as consumers are still prepared to spend at the right price. The annual rate rose 2.9% y/y from 1.7%, the highest since May 2023, but it continues to be boosted by higher inflation. Q2 sales volumes fell 0.3% q/q to be down 0.6% y/y and 2% lower than the 2022 peak. Consumption remains weak as cost-of-living pressures persist but it hasn’t plummeted and so is in line with an on hold RBA.
- The June strength was broad based with household goods up 1.1% m/m, department stores +1.0% and other +1.0%. The latter two have seen a reasonable year rising 4.2% y/y and 6.3% y/y. Restaurants & takeaway sales were flat in June to be up a lacklustre 1.1% y/y.
- The ABS reported that retailers had said consumers were looking for the “best deals before buying big-ticket items like furniture, bedding, TVs and laptops”. Consumers are very price sensitive but will spend.
- The July and Q3 data should give an indication if tax cuts and other stimulus is being spent or saved.
Source: MNI - Market News/Refinitiv
Australia retail sales values %
Source: MNI - Market News/Refinitiv
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STIR: RBA Dated OIS Remain Sharply Firmer Than Pre-CPI Levels
Although softer than Thursday’s levels, RBA Dated OIS remains 6-23bps firmer than pre-CPI levels.
- The market gives a 25bp hike in August a 43% chance versus 55% last Thursday.
- Terminal rate expectations also remain dramatically firmer than pre-CPI levels at 4.48% versus 4.37% before the CPI data. Thursday’s high was 4.53%.
Figure 1: RBA-Dated OIS – Post-CPI Vs. Pre-CPI
Source: MNI – Market News / Bloomberg
AUD: A$ Little Changed, Strengthens Against The Euro Following French Elections
AUDUSD is flat in APAC trading today with little news to give it direction and equities mixed. It rose to a high of 0.6683 early in the session and then trended lower to 0.6665 and is currently slightly higher at 0.6671. The USD index is down 0.1%.
- Aussie has moved the most against the euro following the right-wing National Rally winning the first round of French parliamentary elections. AUDEUR is down 0.3% to 0.6204, close to the intraday low of 0.6201.
- AUDNZD is 0.1% lower at 1.0935 after a low of 1.0930. AUDJPY is little changed at 107.36. AUDGBP is down 0.1% to 0.5270.
- Equities are mixed in today’s trading with the ASX down 0.4%, CSI 300 -0.4% but Nikkei up 0.3%. The S&P e-mini is 0.2% weaker. Oil prices are stronger with the WTI up 0.5% to $81.90/bbl. Copper is down 0.4% though and iron ore is around $107/t.
- Later the US June manufacturing ISM/PMI, European PMIs and preliminary June German CPIs print. Also ECB President Lagarde speaks.
LNG: Gas Prices Mixed In June, But Warm Summer Likely To Boost Demand
LNG prices were mixed in June with Asian prices higher on the month, US lower and European little changed. European prices fell on Friday to a low of EUR 34 in the first half of the session and then recovered to EUR 34.80 but finished down 1.0% at EUR 34.51.
- Temperatures are forecast to rise especially in southern Europe which is expected to increase gas usage. The market continues to monitor the outlook for supply from Russia as disputes over payment continue. Pipeline flows through Ukraine are likely to be stopped next year as Ukraine won’t negotiate with Russia. Norwegian output has increased and remains a vital source since Russia invaded Ukraine.
- US natural gas fell 3.1% at the end of last week to be down 2.2% in June and are 1% lower to $2.57 so far today. They had risen strongly to June 11 but then trended lower over the rest of the month. Friday’s decline was due to continued elevated storage levels at around 20% above the 5-year average. Warmer weather has helped with increased power demand for cooling but inventories remain high. Temperatures are forecast to be above normal in early July according to NatGasWeather.
- Lower-48 US production rose 1.4% y/y as of last Friday with demand +0.7% y/y.
- North Asian prices fell 0.6% on Friday but rose 4% in June as hot weather increased demand for cooling, especially in India.
