Dollar, bond yields dip on inflation data as stocks soar

Lena Tucker
July 16, 2017

USA stocks took a brief tumble after e-mails disclosed Trump's eldest son cited Russian support for his father's 2016 election campaign. Inflation came-in flat versus an expected.2% gain, and retail sales fell by.2% against the expectation for a.1% gain. It's not usually a market mover but with so much attention on inflation at the moment, this report could be an exception.

Political strategists say they expect a tax-reform bill to be presented in the fall and approved by next year, but the markets have doubted whether tax reform is still viable based on how long it has taken Congress to revise Obamacare. The British pound rose sharply against the greenback on Friday, climbing more than 1 percent after data further undermined expectations for more hikes in USA interest rates.

USA two-year yields slid as well, down at 1.343 percent, from 1.355 percent before the data's release.

USA consumer prices were unchanged in June and retail sales fell for a second straight month, pointing to tame inflation. The Standard & Poor's 500 index gained 0.2 percent to 2,447.83. Even excluding for vehicle sales, which have declined recently, retail sales figures still posted a 0.2% drop.

As inflation has slowed, the Federal Reserve's plans to raise interest rates once more this year and three times next year have come under greater scrutiny.

"I would like to see some greater evidence that we are making progress toward meeting our 2% inflation objective in the medium term", he said in an essay published on Thursday. That followed a report that the European Central Bank is likely to signal in September that its asset purchase programme will be gradually wound down next year. "The prospects for a third hike in short-term interest rates this year continue to dim". After initially falling below 2.3%, the 10-year yield climbed back above that level, reflecting strong forces that are still pushing up on yields, analysts said. Meanwhile, growth and inflation has started to show with more consistency in Europe and the United Kingdom, and this has led to even more deductive weakness in the Greenback as traders shift rate hike bets in the Euro and British Pound. It earlier fell to 2.279 percent, its lowest since June 30.

Spot gold gained 0.96 pct at $1,228.61 per ounce by 3:01 p.m. EDT (1901 GMT) after hitting $1,232.76.

For the week, the S&P rose 1.4 per cent, the Dow 1.05 per cent and the Nasdaq 2.6 per cent, it's biggest weekly gain in 2017.

Drugmaker AstraZeneca AZN.L continued Thursday's slide, down 1.6 percent due to uncertainty around reports that CEO Pascal Soriot was preparing to leave the company.

For the week, silver is on track for a gain of around 1.5%.

Oil rose 1 percent on Friday, boosted by lower USA stockpiles, a slight slowdown in US crude production and signs of increased Chinese demand, but trading was volatile as global supply remained strong.

US West Texas Intermediate (WTI) crude futures rose 46 cents to settle at US$46.54 per barrel.

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