Soft data weighs on sentiment with US stocks back under pressure

Summary:

• US stocks flirt with recent lows

• Risk-on sentiment vanishes after Chinese data disappoints

• DE30: shares of carmakers drown as sales slump; French PMI plummets

• USD rising after retail sales but other US data soft

• More selling seen in crypto space as BitcoinCash tumbles

It’s been a bit of an up and down week for the US stock market, but when all is said and done price is in danger of closing at its lowest level since March. Monday saw the US500 tumble below the 2600 handle and in doing so take out the October low but bulls stepped in to buy the dip. Forays higher in the past 3 days have been met with pretty firm rejections and today the market is in danger of revisiting the lows. Last week saw a large bearish engulfing candle on W1 and the current one is showing a doji at present with the signs not looking too promising for longs. The year-to-date lows of 2529 could well see a retest if there’s another push lower and if these are broken below then there’s scope for a sizable move lower.

Chinese monthly releases of retail sales, industrial output and fixed asset investments for November were on the whole a disappointment and have soured the risk-on sentiment seen of late.  Retail sales rose 8.1% YoY missing the consensus set at 8.8% YoY and making a meaningful decrease from the previous month when it grew 8.6%. Basically, it was the slowest pace of growth since May 2003 mirroring the fading domestic demand as the authorities have been trying to crack down on undue leverage.  Going forward, industrial production grew 5.4% YoY and also fell short of the median estimate of a 5.9% YoY increase (the same rate of growth was marked in October). The sole bright spot today came from fixed asset investments as they picked up 5.9% YoY on a year-to-date basis beating the estimate of a 5.8% YoY rise, but on balance this is no doubt a soft data set.

European auto stocks are among the worst performing in early trading following the newest data on new car registrations for November. It showed that the number of registrations plunged 8.1% YoY marking the third consecutive decline, according to the European Automobile Manufacturers Association. This figure produced declines of 23% in September and 7.4% in October - the worse results came on the back of an introduction of new emissions standards on September 1. The association said that the data for December could result in the decline over the entire year with bleak prospects for the following year. Note that the Stoxx 600 Automobiles & Parts Index has plunged 25% on a year-to-date basis. Meanwhile, the new CEO of Audi said during a meeting with workers that “Audi needs readjustments including polishing the brand’s image, enforcing a culture change and strengthening its largest market - China.” Moreover, Audi’s global deliveries slumped as much as 17% last month reflecting a fading demand on luxury cars. As a result, the company lost further ground to its major competitors - Mercedes-Benz and BMW.

This afternoon there’s several pieces of second tier data released from the US with arguably the most important the latest figures on consumer spending. On this front there’s been some pretty positive news with the November advance retail sales month-on-month rising by 0.2% against a consensus forecast of 0.1%. Furthermore the past reading of 0.8% has been revised higher to now stand at 1.1% which makes the rise seem a fair bit more impressive. The USD has built on earlier gains after the release and is looking set to end a good week on the front foot. Yesterday we identified a triangle consolidation that has been in place for the EURUSD in recent weeks and there may have been a decisive break lower today.

There’s been little let up in the selling for cryptocurrencies of late and today there’s been more declines with BitcoinCash the worst hit and plunging by around 15%.  The capitalization of the whole market stands around the $105 billion mark while Bitcoin accounts for roughly 55% of this figure. US-based payments giant PayPal has launched blockchain-based internal incentive program for employees, as Cheddar reported. The blockchain platform was built over half a year by 25 people in a PayPal’s innovation lab in San Jose, and it launched in mid-November, according to Michael Todasco, PayPal’s director of innovation, as Cheddar said. Thanks to the blockchain incentive program, PayPal’s employees could earn tokens by participating in innovation-related programs and contributing ideas. Further, they could check their tokens using PayPal’s internal website.