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Forex Flash: US investors search for answers from last Friday – Deutsche Bank

Advancing equities in the US were punched in the mouth Friday, amidst a Bloomberg report, which suggested that Wal-Mart had its worst start to February sales in seven years, prompting a late afternoon sell-off. The article quoted a Wal-Mart executive describing the company's February sales as a "total disaster" apparently affected by higher payroll taxes this year.

According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “We do not know if this was an isolated occurrence or whether or not this turns out to be a wider trend is yet to be determined, however US retail stocks were the clear underperformer relative to the broader S&P 500 on Friday.” Wal-Mart's stock was off 3.8% at one point, but recovered some ground to close 2.15% weaker on the day. Wal-Mart later issued a statement saying "we often see internal communications that are not entirely accurate, that lack the proper context and represent individual opinions". Overall the S&P500 managed to close higher for the seventh consecutive week, its longest winning streak in two years.

On the data front, the results were slightly more convoluted however. US industrial production for January disappointed (-0.1% vs +0.2% expected) weighed by the largest decline in auto production since August 2012. On a more positive note, the February New York Empire (10.0 vs. -2.0 expected) and the UofMichigan consumer confidence surveys (76.3 vs 74.8 expected) surprised to the upside. The Empire Manufacturing index moved back into positive territory for the first time in six months and reached its highest level since May 2012.

Divergent economic fortunes collectively sap commodities

Amidst the recent drama surrounding the Central Banks, investors have scaled back expectations on a rally in commodities, given the most bearish stance towards these avenues since November. Widespread signs of improving U.S. growth along with fresh concerns of rekindling weakness in the Eurozone have collectively fortified the American dollar in recent weeks, seemingly revitalizing the currency and marking commodity hedges as casualties.
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The president of the European Council Herman van Rompuy will appear before the European Parliament Monday in order to present the agreement on the 2014-2020 EU budget, estimated for 959 billion euros. Meanwhile, the president of the European Parliament Martin Schulz declared that the budget is not centered on the common interest of Europe as a whole.
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