Dollar stronger after retail data, IMF walkout; oil extends drop

[NEW YORK] The dollar maintained its rebound after an increase in retail sales fueled bets on higher US rates, and as the IMF's decision to abandon talks with Greece hit the euro. Asian stock futures were mixed while oil extended losses.

The Bloomberg Dollar Spot Index rose 0.2 per cent by 8:53 am in Tokyo, after rising the first day this week Thursday. The yen and euro were little changed after slipping 0.6 per cent last session. Japanese index futures were bid down in the Osaka pre-market, after contracts on gauges in Hong Kong and China climbed. US futures dropped 0.1 per cent and Australian bonds rallied. Oil in New York fell a second day. Twitter Inc gained in after-hours trade as its chief executive officer stood down.

The International Monetary Fund said its team negotiating with Greece has left Brussels after failing to make progress on a deal to help the indebted nation avert default. The European Union's president accused Greece of playing games with its future. In the US, traders bolstered bets the Federal Reserve will raise interest rates in September after data showed sales at U.S. retailers picked up in May. Japan, India and Hong Kong report on industrial output Friday.

"After the 'deep freeze' figures from January to March, the thawing of consumer spending is another positive for the US economy and a further reason to believe in liftoff from the Fed funds rate," Evan Lucas, a markets strategist in Melbourne at IG Ltd, wrote in a client note. "The fact the IMF walked out of talks overnight and flew straight back to the States doesn't help sentiment or give you confidence a deal will be done by June 19. This will get messy."

The Standard & Poor's 500 Index rose 0.2 per cent Thursday, led by utilities and phone stocks. Twitter added about 4 per cent in extended trading, with the company's statement on the departure of CEO Dick Costolo coming a few minutes after US markets closed. Jack Dorsey, Twitter's co-founder, will take his place from July 1 until a permanent replacement can be found.

Nikkei 225 Stock Average futures were bid for 20,420 in the pre-market, from 20,430 at their close in Japan Thursday. Contracts traded in Chicago were steady at 20,440 after jumping 1.4 per cent last session. The Japanese gauge is down 0.4 per cent this week, set for a second weekly drop.

Futures on the Hang Seng Index in Hong Kong climbed 0.3 per cent with contracts traded in Singapore on the FTSE China A50 Index. Futures on the Hang Seng China Enterprises Index, a gauge of mainland Chinese shares listed in Hong Kong, added 0.5 per cent, while contracts on the Kospi index in Seoul were little changed. Australian S&P/ASX 200 Index futures dropped 0.1 per cent.

New Zealand's NZX 50 Index, the first major stock measure in the Asia-Pacific region to start trading each day, added 0.2 per cent, with the local currency headed for an eighth straight weekly decline following Thursday's 2.6 per cent slide.

The Reserve Bank of New Zealand unexpectedly cut its key interest rate Thursday, sending the kiwi dollar to its weakest level since August 2010. It's the worst performer among 16 major peers this week, on track for its longest run of weekly losses since 2000. Data Friday showed growth in New Zealand manufacturing slowed for a third month in May.

Yields on the country's 10-year bonds fell five basis points, or 0.05 percentage point, to 3.90 per cent following a rebound in U.S. and European debt. Rates on Treasuries due in a decade fell 11 basis points Thursday to 2.38 per cent, while yields on similar maturity German bunds snapped a four-day climb, slipping 10 basis points to 0.88 per cent.

The euro was little changed at US$1.1244 Friday, while the yen weakened 0.2 per cent to 123.62 per dollar.

The IMF's decision to withdraw its team comes amid increasingly sharp criticism from creditors at the Greek government's continued refusal to bow to their demands, risking a default and ultimately an exit from the euro currency area.

"The ball is very much in Greece's court," IMF spokesman Gerry Rice told reporters at a media briefing in Washington on Thursday. "There are major differences between us in most key areas. There has been no progress in narrowing these differences recently," he said.

Sales at US retailers increased 1.2 per cent in May, matching the median forecast of economists surveyed by Bloomberg and improving on a 0.2 per cent advance in April, Commerce Department figures showed Thursday. Applications for unemployment benefits remained below 300,000 for a 14th straight week.

Fed fund futures gave a 55 per cent probability that the central bank will increase benchmark rates in September, up from 52 per cent on June 8, according to data compiled by Bloomberg.

West Texas Intermediate crude fell 0.3 per cent to US$60.59 a barrel, following Thursday's 1.1 per cent decline. WTI is still up 2.5 per cent this week after gains on Tuesday and Wednesday, on track for its 12th weekly advance in 13 weeks.

The International Energy Agency said Thursday that this year's price rally in oil is under threat as the biggest members of the Organization of Petroleum Exporting Countries group pump record amounts of crude. Brent oil sank 0.9 per cent to US$65.11 per barrel.

BLOOMBERG