Written by Chuck Mikolajczak
NEW YORK (Reuters) – A gauge of global stocks rose for a second straight session on Tuesday and U.S. Treasury yields fell after a lower-than-expected report on consumer spending, while investors digested comments from several Federal Reserve officials on interest rates.
The US Commerce Department said retail sales rose 0.1% last month after a downwardly revised 0.2% decline in April. The result was lower than the expectations of economists polled by Reuters for an increase of 0.3%, and indicated that economic activity is slowing with the impact of rising interest rates on consumer spending patterns.
“The weaker-than-expected data tells me that consumers are still having a tough 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 should start thinking about cutting interest rates, perhaps before the end of the year.”
Market expectations have risen that the Federal Reserve may cut interest rates at its September meeting, with a 67% chance of a cut of at least 25 basis points, up from 61.5% on Monday.
Other data showed that US corporate inventories rebounded in April, rising 0.3% after falling 0.1% in March.
The index rose 0.57 points, or 0.00%, to 38,778.67 points, gained 8.53 points, or 0.16%, to 5,481.85 points, and gained 0.11 points, or 0.00%, to 17,857.13 points.
US markets will be closed on Wednesday for the Juneteenth holiday.
MSCI's index of worldwide stocks rose 3.20 points, or 0.40%, to 803.57 after rising to 804.40, close to the record 804.52 set on June 12.
New York Fed President John Williams said that interest rates will gradually decline over time, but he declined to specify when the US central bank could start easing its monetary policy, while Richmond Fed President Thomas Barkin said it needs to… Analysis of several more months of monetary policy. Data before he can think about supporting interest rate cuts.
Other Fed officials also sounded cautionary notes. Governor Adriana Kugler said the central bank cannot risk the progress it has made so far by cutting interest rates too early.
European stocks also rose, with focus turning to economic data and comments from central bank officials, steadying from a sharp decline last week after French President Emmanuel Macron called early elections.
The index closed 0.69% higher, while the broad European index gained 13.14 points, or 0.65%.
The gap between French and German 10-year government bond yields, which is considered a measure of the risk premium on French government bonds, narrowed to 68.96 basis points after reaching 82.34 basis points on Friday, the highest level since February 2017.
US Treasury yields fell after retail sales data. A $13 billion auction of 20-year bonds was considered strong, with a yield about 3 basis points lower than the bidding deadline, with demand reaching 2.74 times the bonds up for sale.
The yield on US 10-year bonds fell by 5 basis points to 4.229%.
The dollar pared gains in the wake of the data and rose slightly during the session. The euro rose 0.03 percent to 105.30, while the euro rose only 0.01 percent to $1.0735.
Against the Japanese yen, the dollar rose 0.09% to 157.85. The British pound fell 0.02 percent to $1.2701.
Earlier in the day, the Reserve Bank of Australia kept interest rates at a 12-year high of 4.35%, as expected, but warned there were still reasons to protect against inflation risks.
The Australian dollar rose 0.59 percent against the US dollar to $0.6651.
The central banks of Norway, Britain and Switzerland are also scheduled to meet this week. Only the Swiss National Bank is expected to announce a rate cut.
It rose 1.37% to $81.43 per barrel and advanced to $85.02 per barrel, up 0.93% on the day.