LONDON: European stock markets seemed happy to quietly carry the week’s gains into the weekend, while Wall Street’s worries about retail weakness were compounded by soft core inflation data. Department store chain J.C. Penney reported disappointing sales Friday, adding to concerns over retail sector business sparked by giant Macy’s figures the previous day. US inflation data for April, while showing a higher headline figure, contained weaker-than-expected core inflation, making the Federal Reserve’s job of pinpointing the right time for its next rate hike more complicated, dealers said. The dollar weakened in response, and so did the New York stock market at the opening as earlier optimism about solid jobs data was mitigated, while T-bonds rose as investors became less sure about an early rate hike.
“Treasury yields and the US dollar are lower, as the data included a cooler-than-expected read on consumer price inflation,” said analysts at Charles Schwab. European equity markets, meanwhile, were modestly optimistic, as they awaited political developments in coming days. Emmanuel Macron will be sworn in as French president on Sunday and is expected to line up a government the following day, giving a first indication of the outlook for his economic reform plans. Germany’s most populous state North Rhine-Westphalia votes in a regional election Sunday, a key test for Angela Merkel’s re-election chances as chancellor.
Earlier in Asia, traders took a step back ahead of the weekend with confidence rattled by a series of below-par Chinese data and the lingering fallout of Trump’s shock firing of the head of the FBI, which some fear could lead to a crisis that will knock the president’s economy-boosting agenda off centre. Tokyo’s Nikkei index closed down 0.4 percent from a 17-month high, while Sydney shed 0.7 percent and Singapore gave up 0.3 percent. Seoul, which closed Thursday at a record high, eased 0.5 percent. Wellington, Taipei and Manila also slipped.
But Hong Kong rose 0.1 percent extending a rally to five days. Bloomberg News reported, without naming sources, that China had made preparations to support the Hang Seng Index if needed ahead of the expected visit of President Xi Xinping to the city for the July 1 handover celebrations. Shanghai — which has fallen about seven percent in the past month on worries about a state crackdown on leveraged investing – ended up 0.7 percent with speculation mainland shares were also being given state backing.
The dollar declined against the yen and euro, having enjoyed a surge Thursday on comments from a top Federal Reserve official backing three more interest rate hikes this year. And on oil markets both main contracts pressed on with their recovery from last week’s sharp losses, with investors cheering a bigger-than-expected drop in US inventories and signs an OPEC output cut was kicking in.