* Bond prices rise as stagnant German growth data weighs
* Canada factory sales plunge, Q2 growth to suffer
By Ka Yan Ng
TORONTO, Aug 16 (Reuters) - Canada’s dollar was weaker against the U.S. dollar on Tuesday morning after disappointing domestic factory sales figures added to a world backdrop of slowing economic growth.
Worries about the global economy slowing more than expected were highlighted by data that showed stagnant growth in Europe’s powerhouse, Germany, which knocked stocks lower and hit the euro. [MKTS/GLOB]
The German data sharpened market focus on Tuesday’s meeting in Paris between French President Nicolas Sarkozy and German Chancellor Angela Merkel, with investors looking for any signs of new measures to contain the euro zone debt crisis.
Weaker prices for oil and other resources also pressured Canada’s commodity-linked currency.
At 9:25 a.m. (1325 GMT), the Canadian currency CAD=D4 was at C$0.9825 to the U.S. dollar, or $1.0178, down from Monday’s North American finish of C$0.9799 to the U.S. dollar, or $1.0205. The currency rose more than a penny in the previous session.
“It’s just giving back some of the gains that we got. And we’re also waiting for what will come out from the meeting between Merkel and Sarkozy,” said Charles St-Arnaud, Canadian economist and currency strategist at Nomura Securities International in New York.
Canadian manufacturing sales for June plunged by a much greater than expected 1.5 percent from May, Statistics Canada data showed on Tuesday, another indication of soft second quarter growth. [ID:nN1E77F087]
Analysts had forecast a drop of 0.4 percent in June. Statscan slightly revised May’s decline to 0.7 percent from an initial 0.8 percent.
Weak second-quarter data has been a factor in lowering expectations of Canadian interest rate hikes later this year.
“The weaker data will reinforce expectations for the Bank of Canada to remain on hold for the next couple of quarters,” wrote Avery Shenfeld, chief economist at CIBC World Markets, in a commentary.
Canada’s big banks now forecast that there will be no rate hikes until next year. [ID:nN1E77B11K]
The weak data for the world economy, highlighted by the German figures, kept bond prices firm across the curve.
Canada’s two-year bond CA2YT=RR edged up 3 Canadian cents to yield 0.994 percent, while the 10-year bond CA10YT=RR advanced 23 Canadian cents to yield 2.477 percent. (Reporting by Ka Yan Ng; editing by Peter Galloway)