Treasury yields tumble after weaker-than-expected retail sales, inflation

MSCI's broadest index of Asia Pacific shares outside Japan ticked up 0.1 per cent. File

Traders on Friday reduced their view the Federal Reserve would raise rates again before year-end following weaker-than-forecast data on consumer prices and retail sales in June, according to interest rates futures.

The unchanged consumer price reading for June followed a 0.1 percent dip in May.

The dollar was also supported by data showing the number of Americans filing for unemployment benefits fell last week for the first time in a month and producer prices unexpectedly rose in June. Inflation has climbed just 1.6 percent from a year ago.

Lower costs for gas, airline tickets, new and used cars and wireless mobile phone plans kept USA consumer prices flat in June, evidence that inflation remains muted.

Meanwhile, the Commerce Department reported that retail sales slipped 0.2% in June, while sales excluding autos also declined 0.2% from May.

US Treasuries yields stayed below their recent peaks, with the 10-year yield at 2.352 per cent compared with 2.398 per cent marked on Friday, its loftiest level in nearly two months.

US crude slipped 0.15 percent to $46.02 a barrel, after rising 1.3 percent on Thursday. The comments helped trigger a big market rally, with the Dow Jones industrial average hitting a record high. The less volatile 12-month CPI measure slowed three-tenths from May to 1.6 per cent, continuing a sharp decline since February. Economists had expected consumer prices to inch up by 0.1%.

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"We need inflation more than anything else".

The US dollar index, which tracks the greenback against a basket of six major rivals, was at 95.18, compared to 95.41 ahead of the report.

U.S. West Texas Intermediate (WTI) crude futures CLc1 rose 46 cents to settle at $46.54 per barrel. Rental costs rose, with owners' equivalent rent of primary residence increasing 0.3 per cent after advancing 0.2 per cent in May. From what we've seen of recent - both the European Central Bank and the BoJ have made efforts to talk-down their currencies and, if they're effective next week, this could bring a modicum of strength to the U.S. Dollar that would essentially amount to a retracement of the "bigger picture' bearish trend".

Most analysts expect Fed officials will lift rates one more time this year. The euro jumped by 0.42%, hitting $1.1449. It earlier fell to 2.279 percent, its lowest since June 30.

The yield gap between shorter-dated and longer-dated Treasuries shrank on Friday after the data, with the spread between 2-year and 10-year yields at 95.7 basis points, its flattest level in more than a week.

The latest data is likely to trigger fresh doubts surrounding the inflation outlook and create renewed uncertainty surrounding potential further rate increases, although the Fed will see the steady rate of services-sector inflation as justifying their policy.

Oil rose 1 percent on Friday, boosted by lower US stockpiles, a slight slowdown in USA crude production and signs of increased Chinese demand, but trading was volatile as global supply remained strong.

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