Housing approvals surge to new heights
US share markets climbed overnight, as risk appetites among investors improved. Technology and mining stocks drove the gains.
At the close, the Dow Jones was up 1.8% and the S&P 500 index was up 1.8% too.
Corrective action continued in Treasuries with risk appetite on a better footing and oil prices steady.
The US Treasury curve steepened with the front end little changed as yields at the long end retreated.
US 10-year Treasury yields fell by 5bp.
EUR/USD pushed lower through the European trading session, after weak German orders data.
EUR/USD hit a low of 1.1754 overnight before staging a modest rally in the New York trading session.
The low for the EUR/USD was the lowest since 2005. Disappointing initial jobless claims data in the US pushed the USD index lower in the New York session.
The 120 level remained elusive for USD/JPY, but dips remain shallow.
GBP/USD was a shade stronger overnight.
The Bank of England decision overnight to leave policy unchanged had little impact because the decision was fully expected.
Meanwhile, AUD/USD traded in a volatile fashion in a narrow range of around 0.8090 and 0.8130.
It is currently trading at the top of the overnight range with better risk appetite and higher gold prices helping AUD demand.
So for now, the AUD/USD is finding a break below 0.8000 elusive; we do not think this will last long.
We continue to expect the AUD/USD to trade lower this year and head towards the mid 70s.
Oil eked out a modest gain overnight, while the price of gold fell back.
The basket of metal prices, LMEX index, was slightly stronger.
The number of residential building approvals surged 7.6% to an all-time record in November.
It follows a solid rise of 11.5% in October, taking the rise over the past two months to 19.9%.
This is the strongest back-to-back rise since September 2012.
Much of the increase was driven by 'other' dwellings, which includes multi-dwelling developments such as apartments and townhouses.
Private-sector other dwellings rose by 16.7% to a record high in November.
Approvals for private-sector housing retreated by 0.3% in November, but they are not far from the peak struck in this cycle.
While approvals for other dwellings are more volatile than stand-alone housing, it still plays a critical role in creating jobs and spurring spending in the economy.
These latest approvals data indicates that investment in housing construction will strengthen over the year ahead, helping to fill part of the gap left behind by the slowdown in mining investment.
Eurozone retail sales rose 0.6% in November, taking annual growth to 1.5%. The national breakdown showed strong gains in Germany, Spain and France of between 0.8% and 1.0%.
Sales in Portugal grew 3.0% after falls in prior months.
The euro zone business climate indicator slipped from 0.17 in November to 0.04 in December. Economic confidence was unchanged at 100.7.
Both outcomes indicate little improvement in conditions at the end of year, but are not indicating a significant deterioration either.
Euro zone producer prices fell by 1.6% in the year to November, down from a 1.3% decline in the year to October, further underscoring the deflationary risks at present.
German factory orders fell 2.4% in November, well exceeding consensus expectations for a 0.8% fall. It followed a 2.9% revised increase in October. Economic activity in Germany remains lacklustre.
Greek banks' access to funding from the European Central Bank (ECB) beyond February will depend on Athens successfully completing a final bailout review and reaching a deal on a follow-up plan with its EU/IMF lenders, announced the ECB overnight.
The statement was the clearest warning yet that Athens cannot expect to rely on ECB funding if it backs out of its obligations under the €240bn bailout program - a prospect which has been pitched by the leftist party Syriza.
The Bank of England (BoE) left interest rates on hold after last night's MPC meeting.
On the data front, annual house price inflation decelerated from an annual pace of 8.1% in November to 7.8% in December, according to the Halifax.
US initial jobless claims fell 4k to 294K in the week ending 3 January. Claims remain low enough to be consistent with firm gains in payrolls.
Further news on the labour market included corporate layoff announcements, which rose 6.6% in the year to December.
Consumer credit rose by US$14.1bn in November, a touch softer than expectations of US$15.0bn, and down on the gain of US$16.0bn in October.