By Chuck Mikolajczak
NEW YORK (Reuters) – A gauge of global stocks rose on Friday while U.S. Treasury yields dipped as a round of soft U.S. data and the latest tariff announcements raised hopes the Federal Reserve may have leeway to be more aggressive in cutting interest rates.
The Commerce Department said retail sales dropped 0.9% last month, the biggest decrease since March 2023, after an upwardly revised 0.7% increase in December, and well short of the 0.1% decline estimate of economists polled by Reuters, suggesting rising prices and tariff uncertainty may be leading consumers to tighten spending.
Other data from the Federal Reserve showed factory output dipped 0.1% last month, short of the estimate calling for a 0.1% increase, after a downwardly revised 0.5% rebound in December, as a sharp drop in motor vehicle output weighed.
On Thursday, U.S. President Donald Trump directed his economic team with devising plans for reciprocal tariffs on every country that taxes U.S. imports, raising the risk of a global trade war, but stopped short of imposing another round of duties.
Investors are keeping an eye on news from the Munich Security Conference, where U.S. Vice President JD Vance said Washington would be able to wield economic and military leverage in talks with Russia to ensure a good peace deal over Ukraine, although his spokesman later denied he was making any threats against Moscow. Vance is also due to meet Ukrainian President Volodymyr Zelenskiy later on Friday.
“Markets are still hoping that tariff headwinds are not going to be as significant as perhaps previously feared, then probably the bigger element this week is enthusiasm about potential Russia-Ukraine ceasefire and to what extent that might be positive for European growth in particular,” said Vassili Serebriakov, an FX strategist at UBS in New York.
On Wall Street, U.S. stocks were higher, led by gains in the energy sector while consumer staples lagged. The benchmark S&P 500 index climbed to about 0.1% from its intraday record 6128.18 set on January 24.
The Dow Jones Industrial Average fell 25.27 points, or 0.06%, to 44,685.58, the S&P 500 rose 4.58 points, or 0.07%, to 6,119.65 and the Nasdaq Composite rose 24.98 points, or 0.13%, to 19,970.63. Each of the three major U.S. indexes were on track for a weekly gain.
Expectations for a cut of at least 25 basis points by the Federal Reserve in June have crept back up to 51.4%, after markets were pricing in a 40.3% change in the prior session, according to CME’s FedWatch Tool.
MSCI’s gauge of stocks across the globe rose 2.27 points, or 0.26%, to 884.64 after inching up to a fresh intraday record of 885.66. The index was on track for its fourth weekly gain in five.
The pan-European STOXX 600 index fell 0.29% but was still on track for their eighth consecutive week of gains, having outperformed U.S. stocks since start of the year, although questions remain whether that can last.
The dollar index, which measures the greenback against a basket of currencies, fell 0.43% to 106.63, with the euro up 0.42% at $1.0509.
Against the Japanese yen, the dollar weakened 0.42% to 152.15 while Sterling strengthened 0.37% to $1.2612 against the greenback.
The yield on benchmark U.S. 10-year notes fell 6.4 basis points to 4.461% but was still on track for a weekly gain.
Oil prices fell, erasing earlier gains, but were on track to snap a three-week streak of declines.
U.S. crude fell 0.38% to $71.02 a barrel and Brent fell to $74.96 per barrel, down 0.08% on the day.
(Reporting by Chuck Mikolajczak, additional reporting by Karen Brettell in New York, Editing by Nick Zieminski)
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