Dollar falls on weak US retail sales - 14.5.2015

US stocks ended flat on Wednesday as Commerce Department reported flat retail sales for April instead of expected 0.2 percent increase. The S&P 500 closed less than a point lower at 2,098.48. Weak retail sales indicates consumer spending, which accounts for two thirds of US GDP, has not recovered after US economy slowed down in the first quarter due to harsh winter, disruptions at West Coast ports resulting from labor disputes, stronger dollar and deep spending cuts by energy firms. Import prices fell in April for tenth consecutive month as cheaper food and industrial supplies offset higher energy costs. The retail sales data together with employment and manufacturing reports suggest the recovery of US economy is not strong enough for the Federal Reserve to raise interest rates soon. CME FedWatch data indicate that traders do not expect an interest rate hike until December at the earliest. The dollar had the worst day in a week on Wednesday with the ICE US dollar index falling 0.9%. Today at 13:30 CET April Producer Price Index, Initial Jobless Claims and Continuing Claims will be released in US. The tentative outlook is negative.

European stocks ended lower for the second session on Wednesday as euro gained against US dollar on weak US data. European exporters have benefited as euro weakened after the start of the monetary easing by the European Central Bank, and stronger euro negatively impacts overseas earnings of European companies. The Stoxx Europe 600 lost 0.2 percent, Germany's DAX fell 1.1 percent. Stocks retreated even though economic data indicated major euro-zone economies performed better than expected and expanded in the first quarter. Italy returned to growth after years of stagnation. First quarter GDP growth in France registered at 0.6% against expected 0.4%, outpacing German economy’s growth at 0.3%. The Bank of England cut its growth forecasts for 2015 and 2016 while official data showed the UK unemployment rate fell to 5.5% in March from 5.6% in February and wage growth came in stronger than anticipated. No important economic data are expected in euro-zone today.

Nikkei fell 1.0 percent to a near one-week low today as investors were unsettled by another rise in global bond yields. Higher bond yields make stocks less attractive investments compared with bonds. Tomorrow at 0:50 CET April Domestic Corporate Goods Price will be released in Japan. At 4:40 CET Bank of Japan Governor Kuroda will speak in Tokyo, and at 6:00 CET April Consumer Confidence Index will be released.

Oil prices settled lower on Wednesday after Energy Information Agency report indicated global supply glut will likely persist in 2015. The monthly EIA report said the Organization of the Petroleum Exporting Countries and non-OPEC producers are engaged in a fight for market share as OPEC production rose above 31 million barrels a day in April. The weekly data showed production in the lower 48 US states increased to 8.870 million barrels-a-day vs. 8.854 million barrels-a-day the prior week. EIA also raised its 2015 forecast for non-OPEC output growth. Thus the global oil supply is rising as the struggle for market share increases production.

Gold prices settled at highest level in more than five weeks as weak retail sales data depressed the dollar and increased the likelihood that the Federal Reserve will raise the interest rates later in the year instead of earlier hike as previously expected.