Major currencies mostly consolidated in ranges today after strong gains in prior sessions. The macroeconomic picture gave the markets a dose of reality and earnings-driven euphoria halted as U.S. equities ended the day relatively flat. It was lucky number 7 for the Dow Jones as it closed marginally higher, up only 0.04%, however the S&P 500 snapped a 6-day win streak closing 0.02% lower. Intel’s record earnings release was not enough to extend stock gains in the face of weak economic data.
U.S. headline retail sales came in softer that analysts forecast (-0.3%), with a 0.5% decline after a 1.1% decline in May. Retail sales ex-autos (-0.1%) were in line with expectations after a May decline of 1.2%. The headline number resulted in a negative open for equities, dollar weakness, and saw the yen crosses drift lower as risk retreated. Stocks managed to edge up into positive territory briefly and the euro reached new 2-month highs in the 1.2770/80 area as Greek Finance Minister George Papaconstantinou told parliament that the government had met targets set by the EU and IMF that would secure a second installment of aid.
Later in the day, Fed officials alerted the markets of that risk had shifted to the downside with the release of their FOMC meeting minutes causing equities to make new lows for the session and further weakening yen crosses. Minor changes were made to economic outlooks as the Fed forecasted slower growth, higher unemployment, and decreased inflation. The revisions underscored a slightly weaker economy moving forward. With regards to policy, the Fed noted that they do not see the need for additional policy stimulus.
Gold was choppy but down roughly 0.3% in line with other commodities. Oil prices shrugged off lower inventories but lost ground due to the weaker Fed outlook. The U.S. Treasury Department auctioned $13 billion worth of 30 year bonds at a yield of 4.08%, lower than the anticipated yield of 4.108%. Treasuries rose and yields dropped affirming the reduction in risk appetite and flight to safety.
Consumer Inflation Expectations and New Motor Vehicle Sales for June will be released out of Australia. There is significant Chinese data due tonight that could set the tone for markets. The reports we are looking for are second quarter Real GDP, Retail Sales and Industrial Production for the month of June, as well as June CPI and PPI. The Bank of Japan will meet tonight to set its target rate, though no change is expected.