SINGAPORE: PMI Rises for February. 

Retail sales were stronger than expected at the end of 2024. Q4 volumes rose 1.0% q/q to be +1.1% y/y after 0.5% & 0.2%. Monthly sales values have been impacted by a change in the timing of seasonal spending. Thus December fell 0.1% m/m after rising 0.7% in November, but it is now up 4.6% y/y after 3.1%, the highest growth rate in almost two years. Expectations for a February rate cut have grown but the retail data are signalling a recovery in spending supported by tax cuts and lower inflation.

• Q4 real retail sales rose at their fastest quarterly rate since Q1 2022 boosted by discounting. Consumers continue to be prepared to spend but only at the right price with retail prices rising 0.4% q/q down from Q3’s 0.6%. Retail volumes per person rose 0.5% q/q, the first rise in two and a half years.
• Q4 sales values rose 1.4% q/q to be up 3.7% y/y after 2.6% in Q3. 

Australia retail sales y/y%

• The drop in December sales was driven by sharp falls in clothing (-1.8% m/m), other retailing (-1.4% m/m ) and restaurants (-0.5% m/m). Household goods saw their fourth consecutive strong month rising 1.6% and spending is now 7.1% higher than a year ago. Food retailing rose 0.1% m/m, which was impacted by supply disruptions, and department stores 0.4%.
• Online sales rose 4.2% m/m to be up 12.7% y/y.
• The ABS noted that “Cyber Monday fell in early December” which lifted spending in the month, especially for household items.
• The monthly series will be replaced by household consumption this year. The December update is out on Tuesday and forecast to rise 0.4% m/m and 3.4% y/y.

ACGBs (YM +4.0 & XM +3.5) are richer and near session highs despite a beat by December Retail Sales.

• Retail sales fell 0.1% m/m (estimate -0.7%) in December, the first drop since March 2024, versus a revised +0.7% in November.
• Building approvals rose 0.7% m/m (estimate +1.0%) in December versus a revised -3.4% in November.
• ANZ job advertisements rose 0.2% m/m in January versus +0.3% in December.
• The strengthening observed during the session appears more closely linked to movements in U.S. Treasuries following the weekend’s US tariff announcements and the subsequent retaliatory measures by Canada and Mexico. China has also indicated it will implement countermeasures and file a complaint with the World Trade Organization.
• In today’s Asia-Pacific session, cash US tsys have twist-flattened, with yields ranging from 6bps higher to 1bp lower. This week’s focus will be on a heavy slate of corporate earnings, key CPI and PPI inflation data, and January’s headline employment report.
• Cash ACGBs are 4-5bps richer with the AU-US 10-year yield differential at -15bps.
• Swap rates are 4bps lower.
• The bills strip is richer, with pricing +2 to +6.

• Last week saw an amazing turnaround from gold to finish 1.00% better for the week after a very poor day, Monday.
• Gold has started this week with a weakening bias, off from Friday’s close of US$2,798.41 to be at $2,792.58 in morning trading.
• Whilst gold’s ‘safe-haven’ status usually prevails, a strengthening USD on the back of tariff news won over sending gold lower this morning.
• The US announced 25% tariffs on goods from Mexico and Canada, and 10% from China coming into effect from Tuesday.
• The potential for a global trade war is now real and in any period of uncertainty the USD strengthens and already has moved by enough to offset gold’s safe haven status.
• That said, gold has started 2025 where it left off last year, performing well and up over 5% year to date. 
•  JPMorgan announced that it plans to deliver US$4bn of gold bullion this moth against contracts that expire in February, representing one of the largest physical settlements on record.