US Retail Slowdown: April Sales Growth Slows Amid Tariff Concerns and Consumer Caution

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3850-1.4080

Euro                 1.5520-1.5760

Sterling            1.8430-1.8670

WTI Oil (opening level) $61.85

The CAD/USD is opening at 1.3965 ( 0.7160 )

Headlines

·    Fed Chair Powell warned of high long-term rates and inflation volatility from supply shocks, stressing anchored expectations for growth and reaffirming the Fed's 2% inflation target to prevent job losses.

·    Prices paid to US producers unexpectedly dropped in April, the largest in five years, mainly due to shrinking margins, suggesting companies are absorbing tariff impacts. The producer price index fell 0.5% after no change in March, contrary to a predicted 0.2% rise. Excluding food and energy, the core PPI declined 0.4%, the steepest since 2015.

·    US retail sales growth slowed sharply in April, with consumers cutting spending on cars, sporting goods, and other imports amid tariff-related price concerns. Retail purchases, unadjusted for inflation, rose by 0.1% (vs 0% est), following a revised 1.7% gain in March, the largest in two years.

·    US factory production dropped 0.4% in April, the first decline in six months, due to higher import duties and other challenges. Motor vehicles, computers, and apparel led the decrease, while business equipment output rose slightly. Capacity utilisation fell to 76.8%, and factory activity remained weak, staying in contraction territory.

·    Japan's economy shrank by 0.7% annually in the first quarter, its first decline in a year, due to lower exports, higher imports, and stagnant consumer spending. This raises concerns about resilience and may lead to discussions on tax cuts or cash handouts before the summer election.

·    Container shipping rates jumped 7.6% this week with the Drewry Composite reaching a four-week high, led by significant 15.6% and 19.3% increases on the Shanghai to Los Angeles and New York routes, on a renewed frontloading surge, as exporters and importers alike in China and the US take advantage of the 90-day truce period.

Key Points

Equities: US mixed; Europe recovers; UK strong GDP; Asia down on GDP and earnings

Volatility: VIX below 18; market calm; cautious anticipation

Digital assets: BTC stable; ETH ETF optimism; Coinbase cyberattack impact

Fixed Income: US treasury yields reversed sharply lower yesterday after a prior surge.

Currencies: The JPY rose further overnight, while the USD weakened in the Asian session.

Commodities: Gold rebounds as bond yields drop on weak US economic data yesterday and then weakens again this morning to a lower level