Stocks Consolidate as Strong Retail Sales are Offset by Fed Minutes

U.S. equities are trading mixed after reopening from the holiday break, as investors are mostly biding their time ahead of the FOMC minutes. Hopes are that the Fed could release more details on its policy outlook or its balance sheet reduction plan, with a possible rate hike skip in September with an announcement then on balance sheet and follow-up launch in OctoberJ. The Dow is lower, S&P and the NASDAQ are higher but, still the weak link as big cap FANG shares remained under pressure. Europe is mostly trading marginally firmer. In Asia, China’s CSI 100 rallied 1.1% and Japan’s N-225 gained 0.25%. Crude oil reversed lower towards $45 per barrel after Russia indicated it is not ready to undertake further production cuts with OPEC.

Eurozone retail sales rose 0.4% month over month in May, leaving the annual rate unchanged at 2.6% year over year. Robust numbers, that together with strong survey data confirm that economic growth remains strong and that consumption and domestic demand continue to underpin the recovery. With the ECB focused on inflation and in particular wage growth, however, this doesn’t change the central bank outlook as officials continue to see the need for ongoing monetary support.

UK Services PMI Missed Expectations

The UK June services PMI missed expectations slightly, dipping to a 53.4 headline reading after 53.8 in May. The median forecast had been for a 55.5 print. Following the disappointing manufacturing and construction PMI reports, the composite June PMI headline worked out at 53.8, ebbing from 54.3 in May). Markit, the compiler of the surveys, said it is “clear that the economy is losing momentum” going into the second half of the year, with optimism and new business growth readings in decline. Political uncertainty following the shock election outcome in early June, with the consequential emergence of a fragile minority government, has been a factor. The pound has sunk to respective three- and five-session lows versus the euro and dollar in the wake of the data release today.

U.S. weekly chain store sales inched up 0.1% in the week ended July 1, according to The Retail Economist data, after a 2.9% gain in the June 24 week and a 2.5% increase in the week before that. The annual rate edged up to 1.9% year over year versus 1.8% year over year. This is the fasted rate since April 29. Strength in apparel sales and summer merchandise, spurred on in part by hot weather, was a pleasant surprise. The heat also drove consumers to air-conditioned malls.