* C$ edges down to C$0.9821 to the U.S. dollar, or $1.0182
* Bond prices rise as stagnant German growth data weighs
* Canada factory sales plunge, Q2 growth to suffer
* Sarkozy-Merkel meeting fails to calm financial markets
* Carney, Flaherty to offer clues on economy on Friday
(Updates to close)
By Ka Yan Ng
TORONTO, Aug 16 Canada's dollar retreated
against the U.S. currency on Tuesday, falling back with other
risk assets as a French-German summit failed to calm financial
markets and data pointed to a slowing world economy.
The pullback came a day after the currency jumped more than
a penny alongside a solid rally in equity markets.
But world stocks were pressured from the get-go on Tuesday
on data that showed stagnant growth in Europe's powerhouse,
Germany, which was followed by figures showing a plunge in
Canadian manufacturing sales in June.
"It's a consolidation of sorts this afternoon as equities
are lower but are not establishing any specific new ground,"
said Jack Spitz, managing director of foreign exchange at
National Bank Financial.
"The CAD is still a sideways trade until there's a breakout
one way or another in equities."
After a meeting on Tuesday, German Chancellor Angela Merkel
and French President Nicolas Sarkozy detailed proposals for
closer euro zone integration, but that did not include boosting
the size of the euro zone's rescue fund or beginning sales of
euro bonds. [ID:nB4E7HT04B]
The meeting did not live up to expectations that it might
result in a proposal to solve Europe's debt crisis, and that
sent stocks, crude oil, and other assets lower. But government
bond prices perked up.
The Canadian currency CAD=D4 ended at C$0.9821 to the
U.S. dollar, or $1.0182, down from Monday's North American
finish of C$0.9799 to the U.S. dollar, or $1.0205.
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 37 Canadian cents to yield 2.461 percent.
Canadian manufacturing sales for June plunged by a much
greater than expected 1.5 percent from May, Statistics Canada
data showed on Tuesday, confirming that the economy stalled in
the second quarter. Analysts had expected a milder 0.4 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
Canadian policymakers could provide important clues about
spending plans and interest rates on Friday when a rare
midsummer parliamentary committee meeting examines market
instability and foreign debt crises. [ID:nN1E77F1AL]
Finance Minister Jim Flaherty and Bank of Canada Governor
Mark Carney will testify at the House of Commons finance
committee, which is looking into the impact on Canada of
foreign economic turmoil.
Canada's big banks now forecast that there will be no rate
hikes until next year. [ID:nN1E77B11K]
(Reporting by Ka Yan Ng; editing by Peter Galloway)