GLOBAL MARKETS-Stocks rise, US yields decline after retail sales data

BY Reuters | ECONOMIC | 06/18/24 02:52 PM EDT

(Updated at 2:21 p.m. ET/1821 GMT)

By Chuck Mikolajczak

NEW YORK, June 18 (Reuters) -

A gauge of global stocks advanced for a second straight session on Tuesday and U.S. Treasury yields fell after a softer-than-expected report on consumer spending, while investors digested comments from multiple Federal Reserve officials on interest rates.

Retail sales rose

0.1% last month after a downwardly revised 0.2% drop in April, the U.S. Commerce Department said. The result was below expectations of economists polled by Reuters for a gain of 0.3%, and indicated that economic activity was slowing as higher interest rates affect consumer spending patterns.

"The weaker-than-expected data's telling me that consumers are still having a difficult time and that the economy is still moving forward, but at a slower pace," said Robert Pavlik, senior portfolio manager at Dakota Wealth Management in Fairfield, Connecticut.

"The Fed has to start thinking about cutting interest rates, perhaps sooner than the end of the year."

Market expectations that the Federal Reserve could cut rates at its September meeting crept higher, pricing in a 67% chance for a cut of at least 25 basis points, up from 61.5% on Monday.

Other data showed U.S. business inventories rebounded in April, increasing by 0.3% after slipping 0.1% in March.

The Dow Jones Industrial Average rose 0.57 points, or 0.00%, to 38,778.67, the S&P 500 gained 8.53 points, or 0.16%, to 5,481.85, and the Nasdaq Composite gained 0.11 points, or 0.00%, to 17,857.13.

U.S. markets will be closed on Wednesday for the Juneteenth holiday.

MSCI's gauge of stocks across the globe rose 3.20 points, or 0.40%, to 803.57 after climbing to 804.40, just shy of the record 804.52 hit on June 12.

New York Federal Reserve Bank President

John Williams said

interest rates will come down gradually over time, but declined to say when the U.S. central bank can kick off its monetary policy easing, while Richmond Fed President

Thomas Barkin said

he needs to parse several more months of data before he can consider supporting a rate cut.

Other Fed officials

also struck notes

of caution. Governor

Adriana Kugler said

the central bank can't risk the progress made so far by cutting rates too soon.

European shares

also climbed

, as the focus shifted to economic data and comments from central bank officials, steadying from a sharp drop last week after French President Emmanuel Macron called a snap election.

The STOXX 600 index closed up 0.69%, while Europe's broad FTSEurofirst 300 index gained 13.14 points, or 0.65%

The gap between French and German 10-year government bond yields, seen as a gauge of risk premium on French government bonds, narrowed to 68.96 basis points after hitting 82.34 bps on Friday, the highest level since February 2017.

U.S. Treasury yields

moved lower

following the retail sales data. An auction of $13 billion in 20-year bonds was seen as strong, with a yield nearly 3 basis points below the bidding deadline, with demand at 2.74 times the bonds on sale.

The yield on benchmark U.S. 10-year notes fell 5 basis points to 4.229%.

The dollar pared gains on the heels of the data and was only slighter higher on the session. The dollar index edged up 0.03% at 105.30, while the euro rose just 0.01% at $1.0735.

Against the Japanese yen, the dollar strengthened 0.09% at 157.85. Sterling weakened 0.02% at $1.2701.

Earlier in the day, the Reserve Bank of Australia kept rates at a 12-year high of 4.35%, as expected, but warned there were still reasons to guard against inflation risks.

The Australian dollar strengthened 0.59% versus the greenback at $0.6651.

Central banks in Norway, Britain and Switzerland are also scheduled to meet this week. Only the Swiss National Bank is expected to announce a rate cut.

U.S. crude rose 1.37% to $81.43 a barrel and Brent advanced to $85.02 per barrel, up 0.93% on the day.

(Reporting by Chuck Mikolajczak; Reporting by Lisa Mattackal and Ankika Biswas in Bengaluru; Editing by Sharon Singleton and Leslie Adler)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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