OVERNIGHT MARKET UPDATE:

·         US retail sales were much weaker than expected, declining 0.6% m/m in February, against market expectations of a 0.3% m/m rise. Control group sales (which feed directly into GDP) were flat (mkt: +0.4% m/m). In part, it appears likely that the much colder-than-usual weather over the second half of February contributed to the weakness.

·         US initial jobless claims declined to 289k (mkt: +305k) from an upwardly revised 325k last week. Colder weather also likely played a role in lifting claims over the previous few weeks but overall the trend decline remains intact and is consistent with strong momentum in non-farm payrolls.

·         Euro area industrial production declined 0.1% m/m in January. The decline was largely driven by consumer and intermediate goods, which fell 2.2% m/m and 0.5% m/m respectively. The weaker euro, however, should assist activity moving forward.    

·         In the currency markets, weakness from US retail sales amplified profit taking already underway in USD positioning. NZD remained strong after the RBNZ emphasised New Zealand was in a different situation to other countries, while a relatively neutral employment report in Australia was enough to propel the AUD higher.

·         US 10-year Treasury yields inched up 1 bp to 2.12%.   

·         US equities bucked the trend, buoyed by financials, with commentators suggesting soft retail sales may keep the Fed on hold for longer.                   

·         Crude oil prices were lower. After gains earlier in the session as the USD rally stalled, oil prices retreated over fears of a new supply build. The reopening of the Houston Shipping Channel for oil imports and the US refinery workers strike potentially nearing a resolution added to the bearish sentiment in the market, as US crude inventories and storage capacity continue to grow.   

Gold was slightly higher due to the USD weakening.