The dollar index hit its highest in more than three months while global stock indexes edged up yesterday as weaker-than-expected US retail sales bolstered confidence the Federal Reserve will hold off raising rates soon.
The S&P 500 was up slightly following the data, which showed US retail sales were flat in April as households cut back on purchases of automobiles and other big-ticket items, indicating the economy was struggling to rebound.
The Fed has said it will raise rates only when data points to a strengthening economy. Growth in the first-quarter slowed to a crawl as a strong dollar, harsh winter and a steep fall in oil prices hurt profits and discouraged consumers from spending.
MSCI’s all-country world index of stock performance in 46 countries was up 0.4 per cent, also helped by some signs of improved growth in Europe. The best French growth reading in two years added to signs, including from Spain, that some of Europe's weaker southern economies are picking up. Germany missed forecasts, however.
Germany and Italy both successfully sold government debt, and yields on the secondary market fell, but traders were sceptical as to whether this meant three weeks of turmoil on the world’'s major bond markets was over.
The Dow Jones industrial average fell 1.84 points, or 0.01 per cent, to 18,066.39, the S&P 500 gained 1.42 points, or 0.07 per cent, to 2,100.54 and the Nasdaq Composite added 8.49 points, or 0.17 per cent, to 4,984.68. US benchmark 10-year notes traded both sides of unchanged in a volatile session, but were last down 2/32 in price to yield 2.27 per cent, up from 2.26 per cent late on Tuesday.
A dramatic selloff in German Bunds has helped push Treasury yields higher in recent weeks. German 10-year bond yields have jumped around half a percentage point from record lows hit in mid-April. The dollar index was last down one per cent after hitting a more than three-month low.
Expectations of further monetary stimulus in China lifted Asian markets. The People’s Bank of China cut its benchmark one-year lending and deposit rates by 25 basis points on Sunday, the third cut in six months. Economists expect more cuts to follow. Crude oil added to its overnight gains as the weaker dollar lifted commodities denominated in the currency, and after OPEC raised slightly its forecast for world oil demand growth.
Brent was up $1.22 at $68.08 a barrel after rallying three per cent on Tuesday, while US crude was up 53 cents at $61.28.