Weak U.S. Retail Sales Weigh on Dollar and Treasury Yields

Investors have interpreted a surprisingly weak U.S. retail sales report as a sign of a softening economy, reducing expectations for further interest-rate increases from the Fed. The U.S. Dollar and U.S. Treasury yields have declined in response, while the impact on equity futures has been limited. It is otherwise a mixed summer Friday, with earnings season winding down and the U.S. signalling additional economic pressure against Iran.

U.S. retail sales unexpectedly declined in July (-0.6% vs Street 0.1%), while retail sales excluding autos also fell (-0.3% vs Street 0.2%). Year-over-year retail sales growth slowed significantly to 5.0% from 6.7%.

NASDAQ futures are up 0.2%, while Dow futures are down 0.2%.

In Asia, the Nikkei was up 0.6%, while the Hang Seng was down 1.1%. In Europe, the DAX is up 0.8%, while the FTSE is down 0.1%.

Among Commodities, Crude Oil has slipped back to $81.84/bbl after trading as high as $82.78/bbl earlier this morning, while Brent Crude has retreated to $87.56/bbl after climbing as high as $88.45/bbl. Gasoline is down 0.3%, trading near $3.10/gallon. Gold is up 0.2%, trading near $4,425/oz, Silver is up 0.1%, and Copper is down 0.3%, trading back under $6.60/lb.

The U.S. 10-year Treasury note yield has slipped under 4.65%, while the U.S. 30-year Treasury note yield has fallen below 5.25%. The U.S. Dollar Index is down 0.4%, while the Euro and Canadian Dollar are each up 0.4%.

Looking ahead, trade talks between the U.S. and Canada continue ahead of the planned imposition of new U.S. tariffs on August 19, which could influence market sentiment as the deadline approaches.

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