Marketmind: Retail sales and a call to Arm

A look at the day ahead in U.S. and global markets by Alun John

U.S. retail sales numbers and PPI are Thursday’s chance to gauge the health of the world’s largest economy after markets largely took the previous day’s crucial inflation data in their stride.

There is plenty else to watch as well though, with the first day of trading for Arm, after UK-based chip designer raised $54.5 billion in the world’s largest IPO this year, and a crucial European Central Bank meeting.

The data is expected to show easing retail sales growth, after a pick-up in July, and investors will be watching – and stop us if you’ve heard this before – the extent to which higher interest rates are trickling through to consumers, as well as keeping an eye on the impact of higher energy prices.

A sharply lower number might be seen by markets as giving confidence to the Federal Reserve that its work is done.

Consumer inflation data on Wednesday – the most important scheduled release of the week – did little to change expectations the Fed will not rates interest rates at next week’s meeting.

A hike later in the year remains a possibility though, and it would take a really punchy PPI or retail sales print to change those expectations significantly, particularly with the Fed due to release its latest ‘dot plot’ of rate expectations along with its decision next week.

Providing a bit of excitement for markets is the first day of trading for Arm, which was valued at $54.5 billion in its U.S. initial public offering on Wednesday.

Thursday’s main event globally is the ECB rate decision. Markets are unsure of the outcome, with market pricing reflecting a 65% chance of a 25 basis point hike.

The decision is due 1215 GMT (0815 ET) so will be old news by the time U.S. share markets open, but it is likely to give the euro a jolt with a move in euro/dollar rippling across into the broad dollar index.

Ahead of the decision the euro was up a touch against the dollar, but near a three month low at $1.0739.

Also catching eyes in Europe was a blast from Beijing and warnings of damaged trade relations after the European Commission launched a probe into China’s electric vehicle subsidies.

Chinese auto makers’ shares fell on the news of the European probe, as did European car makers after the Chinese response.

Key developments that should provide more direction to U.S. markets later on Thursday:

* ECB policy decision

* Arm Holdings begins trading

* U.S. retail sales

(Editing by Toby Chopra)