Stocks are consolidating Monday’s gains this morning as investors assess the impact of central bank decisions and disappointing economic news from China. Overnight, Chinese retail sales (-0.6% v. Street 0.0%) and fixed asset investment (-4.1% v. Street -2.0%) both came in weaker than expected, raising concerns about the pace of economic activity and contributing to a 1.4% decline in Hong Kong’s Hang Seng Index. Elsewhere in Asia, the Bank of Japan raised its benchmark interest rate by 0.25% to 1.00% as expected, while the Reserve Bank of Australia left its overnight rate unchanged at 4.35%, also in line with expectations. The Nikkei edged up 0.1% while European markets have been firmer this morning with the DAX and FTSE each gaining 0.6%.
In North America, US index futures are little changed with both Dow and NASDAQ futures up 0.2% as investors continue to digest Monday’s rally and look ahead to a busy stretch of central bank meetings and economic reports. Bond markets have been steady with the US 10-year Treasury yield holding near 4.45% and the 30-year Treasury yield near 4.95%. Currency markets have also been quiet. The US Dollar is little changed against most major currencies, the Yen has shown little reaction to the Bank of Japan decision, while the Euro and Canadian Dollar have each posted modest gains.
Meanwhile, energy markets remain a major focus. Crude Oil is down another 3.6% this morning, breaking below $80.00 per barrel, while Gasoline has fallen 1.9% and continues to slide below $3.00 per gallon. Traders appear increasingly confident that Friday’s planned signing of an agreement between the United States and Iran will proceed as expected, potentially reducing geopolitical risk and easing concerns about supply disruptions. Precious metals have been mixed with Gold up 0.3%, Silver up 0.8% and Copper down 0.1%.
Looking ahead, investors will continue to monitor developments from the G7 Summit in Paris while preparing for several important economic and policy events. Retail sales figures are due in the United States on Wednesday, followed by Canada and the United Kingdom on Friday. The first Federal Reserve meeting chaired by Kevin Warsh concludes Wednesday and although no change in interest rates is expected, investors are likely to focus closely on updated economic projections and commentary regarding the outlook for growth, inflation and future monetary policy.
The Swiss National Bank and the Bank of England are also scheduled to announce policy decisions on Thursday, with both expected to leave rates unchanged. Markets will also continue to watch developments surrounding the anticipated US-Iran agreement, which remains scheduled to be signed on Friday.