Weak data pare traders' view on year-end United States rate hike

Cautious Fed Lifts Global Stocks to Record High, Investors Eye Earnings Lift

The US dollar declined against its major counterparts in the European session on Friday, as US inflation turned flat in June and retail sales unexpectedly decreased for the second consecutive month, dampening expectations for faster rate hike by the Federal Reserve.

Following the surprise rise in June producer prices yesterday, today's consumer prices, on the other hand, came out softer than expected over the same period.

Retail sales and CPI inflation are two of the most important pieces of U.S. data we get each month and both are due to be released shortly before the open on Wall Street.

Data from the Commerce Department showed that retail sales fell by 0.2% in June after edging down by a revised 0.1% in May. However, the 10-year Treasury yield and USA dollar continued to head lower.

As we discussed two weeks ago, USA data has disappointed for much of 2017, and that's created questions behind just how aggressively the Fed might be able to hike. The British pound rose sharply against the greenback on Friday, climbing more than 1 percent after data further undermined expectations for more hikes in US interest rates.

Among mid-caps, Carillion CLLN.L saw a small relief bounce from heavy losses this week, rising 1.3 percent after the crisis-hit construction and support services contractor hired HSBC as joint financial adviser and corporate broker, amid speculation it is preparing a rights issue. The remarks were seen as signaling that the Fed might slow the pace of rate hikes if inflation remains below the Fed's 2 percent target.

Slow inflation and stagnant wage growth has baffled economists given the very low unemployment rate, but United States central bankers continue to say they expect inflation to rebound allowing them to raise the benchmark interest rate gradually.

In her House comments, Yellen discussed the possibility that a recent slowdown in inflation could persist longer than the Fed expects. Yellen and her cohorts have emphasized their belief that the pullback in inflation is transitory and driven by short-term factors like recent price competitiveness in cell phone plans.

MSCI's broadest index of Asia-Pacific shares outside Japan ticked up 0.3 per cent. Japan's yen-sensitive Nikkei slid 0.4 per cent on the yen's gains but MSCI's dollar-denominated Japan index gained 0.5 per cent. The Standard & Poor's 500 index gained 0.2 percent to 2,447.83.

The Dow Jones Industrial Average .DJI rose 84.65 points, or 0.39 percent, to 21,637.74. Retail sales rose 2.8 per cent year-on-year in June.

On Wednesday and Thursday, Fed Chair Janet Yellen testified in front of Congress as part of the bank's twice-annual Humphrey-Hawkins testimony. After initially falling below 2.3%, the 10-year yield climbed back above that level, reflecting strong forces that are still pushing up on yields, analysts said.

The greenback edged down 0.2 percent to 1134.30 against Korean won.

OIL: Benchmark U.S. crude gained 7 cents to $46.15 per barrel in electronic trading on New York Mercantile Exchange.

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