Morning Bid: Retail risk

• July retail sales decline was partly attributed to falling oil prices and Amazon shifting 'Prime Day' to June, but aligns with dropping consumer confidence in University of Michigan surveys
• Fed rate hike expectations for September have moderated following the retail miss and recent subdued inflation data, though oil price increases from Iran standoff may shift outlook before next month's meeting
• China's economic slowdown continues with industrial output and retail sales weakening, while new home prices fell 3.2% year-over-year in July amid persistent property sector struggles

Market Summary: Retail Risk

Key Developments

U.S. retail sales posted their largest decline in nine months in July, prompting increased scrutiny of upcoming second-quarter earnings from major retailers Home Depot, Target, and Walmart. The drop was partially attributed to retreating oil prices and Amazon shifting its Prime Day promotion to June this year.

Market Implications

The weak retail data, combined with declining consumer confidence from the University of Michigan survey and subdued inflation reports, has dampened Federal Reserve rate hike expectations for September. This dovish shift has supported Wall Street indexes in pushing toward record highs. Fed meeting minutes from July's split policy decision are due Wednesday, with industrial production data expected Tuesday.

Recent oil price increases amid an Iran-U.S. standoff could alter the Fed outlook before next month's meeting. President Trump indicated higher gas prices were acceptable to maintain pressure on the conflict.

Global Markets

Japan's 10-year government bond yields reached a three-decade high Monday, despite GDP growth coming in below expectations at 1.1% annualized for Q2. The yen strengthened as the dollar weakened on revised Fed expectations.

China's economy showed continued weakness, with new home prices declining 3.2% year-over-year and 0.1% month-over-month in July. Industrial output and retail sales slowed amid extreme weather and weak domestic demand, intensifying pressure for additional government stimulus.

Key Data Releases

• New York Fed manufacturing survey (Monday)
• Canada July CPI (Monday)
• Fed minutes (Wednesday)