Morning Bid: Retail risk

The recent drop in U.S. retail sales, marking the first decline in nine months, set the tone for the week ahead as investors focused on second-quarter results from major retail chains like Home Depot, Target, and Walmart. The July sales figures, impacted by a temporary dip in oil prices which later rebounded, coincided with a decline in consumer confidence as reported by the University of Michigan survey.

This, coupled with subdued inflation data from the previous week, has tempered expectations of a Federal Reserve rate increase in September. The recent surge in oil prices, fueled by geopolitical tensions in the Iran conflict, could alter this assessment before the Fed's upcoming meeting, but for now, the outlook remains favorable for Wall Street with stock indexes reaching new highs.

President Trump has advised Americans to accept slightly higher gas prices in exchange for continued support in the Iran situation. Meanwhile, the Fed will release minutes from their July policy meeting on Wednesday, and an industrial production data point will be released tomorrow. In Japan, 10-year government borrowing rates hit a 30-year high on Monday, despite GDP growth in the second quarter falling below expectations, growing by 1.1% annually.

This subdued economic performance could complicate the Bank of Japan's rate hike plans. Meanwhile, China's economy showed signs of weakening at the beginning of the second half, with industrial output and retail sales slowing due to extreme weather conditions and persistent low domestic demand. This puts pressure on policymakers to bolster stimulus efforts.

China's retail sales, a key indicator, slowed further as new home prices dropped by 3.2% from a year ago and 0.1% from June, indicating a sluggish real estate market.