· The euro held at a one-week low on Wednesday, ignoring data from Germany that showed the economy returned to growth in the first quarter, as trade tensions between the world’s two biggest economies cast a shadow over risk appetite.
The single currency has been caught in the cross-currents of an escalating dispute between Washington and Beijing since last week, unable to conclusively rise above the $1.1250 level.
The single currency was broadly steady at $1.1213 - just above a one-week low of $1.1197 hit in the Asian session and more than 3% below a 2019 high of nearly $1.16 in early January.
The Chinese yuan itself was slightly improved on the day at 6.8993 per U.S. dollar, but still close to a five-month low hit on Tuesday.
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 97.569 after seeing highs above 97.6 yesterday.
· U.S. retail sales unexpectedly fell in April as households cut back on purchases of motor vehicles and a range of other goods, pointing to a slowdown in economic growth after a temporary boost from exports and inventories in the first quarter.
The Commerce Department said retail sales slipped 0.2% last month after surging 1.7% in March, which was the largest increase since September 2017. Economists polled by Reuters had forecast retail sales gaining 0.2% in April. Retail sales in April increased 3.1% from a year ago.
Following the weak reports on Wednesday, the Atlanta Federal Reserve cut its second-quarter gross domestic product (GDP) growth estimate to a 1.1% annualized rate from a 1.6% pace. The economy grew at a 3.2% rate in the January-March period.
· China sold the most U.S. Treasuries in almost 2-1/2 years in March amid uncertainty about a trade deal between Beijing and Washington, data from the U.S. Treasury Department released on Wednesday showed.
The latest data on China’s U.S. bond holding were collected before a sudden breakdown in trade talks between the world’s two biggest economic powers 1-1/2 weeks ago and prior to the U.S. duty hike on Chinese goods, which went into effect on Friday.
China sold $20.45 billion in Treasuries in March, the most since October 2016, following $1.08 billion in purchases the month before.
· The Trump administration plans to delay auto tariffs by up to six months, stopping itself for now from widening global trade disputes, four sources told CNBC.
The White House faces a Saturday deadline to decide whether to slap duties on car and auto part imports over national security concerns. After Saturday, the administration would have another 180 days to come to a decision as long as it is negotiating with its counterparts.
President Donald Trump sees the tariffs as a way to gain leverage over trading partners such as the European Union and Japan during ongoing talks. But the president risks sparking fresh global trade clashes if he goes through with car duties. The European Union, for example, has already prepared a list of retaliatory duties to implement if Trump targets autos.
Stocks gained back their their losses Wednesday following news of the administration’s plans, which were confirmed by a source briefed on the talks, an administration official and two foreign officials. Shares of automakers such as Ford and General Motors jumped.
· U.S. President Donald Trump will outline on Thursday a plan to harden border security and overhaul the legal immigration system to favor applicants who speak English, are well-educated and have job offers, senior administration officials said.
· Concerns of a renewed showdown between Italy and the European Union are rippling through euro-area assets.
Italian bonds and stocks tumbled, leaving investors scrambling for the safety of German bunds a day after Deputy Prime Minister Matteo Salvini ratcheted up tensions by saying he would be prepared to see the country’s deficit rise above EU limits if it were to boost employment.
Fears over Italy’s deficit have resurfaced over the past week following a projection from the European Commission that the shortfall will exceed the bloc’s 3% limit in 2020. A battle between the nation’s leaders and Brussels roiled the nation’s bond markets last year before an agreement was finally reached. A strong performance by Europe’s populists at the European Parliamentary elections next week could embolden Salvini further.
Luigi Di Maio on Tuesday criticized a suggestion by his coalition partner Matteo Salvini that Italy could break European Union fiscal rules and increase its public debt in order to spur job creation.
Di Maio, leader of the anti-establishment 5-Star Movement, told reporters in the central city of Perugia it was “pretty irresponsible” to create market tensions by speaking about increasing the high debt level.
· Oil futures edged up on Wednesday as worries that rising tensions in the Middle East could hit global supplies overshadowed an unexpected build in U.S. crude inventories.
U.S. West Texas Intermediate crude futures settled 24 cents higher at $62.02 per barrel. Brent crude futures rose 53 cents to $71.77 a barrel.
· U.S. crude stocks rose unexpectedly last week to their highest since September 2017, while gasoline stockpiles decreased more than forecast, the Energy Information Administration said.
Crude stocks swelled by 5.4 million barrels, surprising analysts who had expected a decrease of 800,000 barrels.
Reference: CNBC, Reuters, Bloomberg
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