LONDON – A mixed set of U.S. retail sales data did little to alter the cautious mood in markets Friday as investors geared up for next week’s crucial meeting of the U.S. Federal Reserve. Ongoing uncertainty over Syria also kept a lid on sentiment.
Though retail sales in August rose by a monthly 0.2 per cent, half the rate anticipated in the markets, the previous month’s gain was doubled to 0.4 per cent. Retail sales are considered an important measure by investors as they account for around 70 per cent of the U.S. economy.
Though the gains are hardly spectacular, analysts said it still remains likely that the Fed will start reducing its stimulus at the end of its two-day policy meeting on Wednesday. Currently, most analysts expect the Fed to begin “tapering” its stimulus by $10 billion a month. The Fed has been buying $85 billion in financial assets every month in an attempt to keep a lid on borrowing rates and boost lending. Most economic indicators have suggested that the U.S. economy, the world’s largest, is healing.
“Today’s retail report is unlikely to tell the Federal Reserve anything new regarding the health of the economy,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. “The momentum towards full recovery remains intact and is unlikely to stall the Fed’s desire to scale back its level of bond purchases.”
Given that the highly anticipated figures were largely in line with expectations, the reaction among investors was muted and stocks were trading in fairly narrow ranges.
In Europe, the FTSE 100 index of leading British shares closed down 0.1 per cent at 6,583.80 while Germany’s DAX rose 0.2 per cent to 8,509.42. The CAC-40 in France also ended 0.2 per cent higher at 4,114.50.
In the U.S., the Dow Jones industrial average was up 0.4 per cent at 15,368 while the broader S&P 500 index rose 0.3 per cent to 1,688.
As well as focusing on the future of Fed policy, investors continued to monitor any developments concerning Syria. Russia proposed Monday that Syria avoid a U.S. military strike by surrendering control over its chemical weapons. Damascus quickly jumped at the offer. Top U.S. and Russian diplomats are holding talks in Geneva to discuss the specifics.
The cautious tone was also clearly evident earlier in Asia, with Japan’s Nikkei rising 0.1 per cent to 14,404.67. Hong Kong’s Hang Seng index lost 0.2 per cent to 22,915.28, while South Korea’s Kospi was down 0.5 per cent at 1,994.32.
Foreign exchange markets were also caught up in the tepid mood, with the euro down 0.1 per cent at $1.3280 and the dollar 0.2 per cent lower at 99.32 yen. Oil prices drifted back after couple days of modest gains. The benchmark New York rate was down 75 cents at $107.85 a barrel.