Weaker U.S. Retail Sales Data Prolongs Tapering

Yesterday's weaker than expected U.S. Retail Sales m/m, backed the view that the U.S. Federal Reserve (FED) will hold off reducing its bond buying stimulus anytime soon. This had the Asian Pacific MSCI-index inching another 0.1 %. DXY, the U.S. Dollar index measured against a basket of six major currencies edged lower. The EUR/USD is steady at 1.3071, while the Japanese Yen lost ground against the greenback at 99.77 yen a dollar. The Australian dollar was slightly stronger as the Reserve Bank of Australia kept its monetary policies unchanged.

On Wednesday, FED Chairman Ben Bernanke will be presenting the twice-yearly monetary policy report to Congress, giving new clues to the FED's thinking on when to start tapering. U.S. stocks were slightly up on Monday with Boeing up 3.72 % as the winner. Citigroup presented strong quarterly results and the S&P ended higher for the eighth straight day, which is the longest streak since mid-January. U.S. retail sales data increased 0.4 %, half the rise economists had forecasted.

The FED has been focusing on the labor market improvements, to decide when to start tapering monetary easing. However, weakness in the consumer sector could indicate broader economic problems and lower U.S. growth expectations. There are no big changes in the currencies scenario, but the Yen could face new pressure as the week progresses. Forthcoming elections to the upper Japanese chamber might result in a big victory for Shinzo Abe’s party, and give new momentum for aggressive monetary easing.

The euro remains steady, but a slide in German exports, political wrangling over austerity measures in Portugal and political turmoil in Spain in the wake a fresh financial scandal, create fresh concern as to the further direction of the common currency. Commodities were mixed after the presentation of China’s GDP yesterday. Both New York crude, NYMEX and Brent are keeping up. Gold is slightly lower at USD 1280 an ounce.