FTSE ahead as sterling dives on retail sales

Whilst equity indices across Europe are siting firmly in the red, the FTSE pushed into the black early on, kicked higher by a sharply weaker pound following disappointing retail sales data. However, the index is seen drifting lower as a weaker start on Wall Street weighs on demand.


Whilst equity indices across Europe are siting firmly in the red, the FTSE pushed into the black early on, kicked higher by a sharply weaker pound following disappointing retail sales data. However, the index is seen drifting lower as a weaker start on Wall Street weighs on demand.

Retails sales; the straw that broke the camel’s back
Retails sales figures were an uncomfortable read. Retail sales fell -0.5% month on month in June, down from an upwardly revised 1.4% growth in May and significantly below the 0.2% forecast. On an annualised basis, retails sales increased 3%, down from 4.5% in May and well short of the 3.5% expected. 

Whilst hot weather can sometimes encourage consumers to hit the high street, June’s heatwave, combined with the World Cup kept consumers away, resulting in non-food retailers suffering from reduced footfall.

Today’s results are part of a continuing trend. Retailers in general have been under intense pressure over the past 18 months as squeezed consumers hold back on spending in the face of higher prices and sluggish wage growth. Big names such as Marks and Spencer, Mothercare and House of Fraser have been closing stores in order to reduce costs. Meanwhile internet spending, continued to break news records.

Sterling was already down 0.3% before the release has since plunged through $1.30 to a day’s low of $1.2950.  Appearing to be the straw that broke the camel’s back, retails sales figures made for a hat-trick of disappointing data for the BoE to ponder over before they meet in two weeks’ time. Doubts were already growing as to whether the BoE would be able to justify a rate rise with inflation at a one year low and wage growth slipping. Now with knowledge that consumers have not been spending and with the likelihood of a no deal Brexit picking up, a rate rise in August is by no means a done deal.

Trade war fears return to haunt the Dow
The Dow has opened 120 points lower, ending its 5-day winning streak as trade war fears made a comeback. With concerns over trade cropping up in the Fed’s Beige Book and Fed Chair Powell echoing these concerns in his second day of testimony before law makers in Washington, traders were finding it hard to ignore these warning signs. Not even a beat from IBM were sufficient to lift turn sentiment. 

Ryanair Sell Off Slows Amid Flight Cancellations
Ryan air share price extended losses on Tuesday, as traders continue to digest the cancellation of over 600 flights over a cabin crew strike. After 1.3% decline in the share price on Wednesday, today’s 0.1% decline is relatively muted. The fact is that a 1.4% loss so far over the cancellation of 600 flights is a very limited reaction from traders. The stock is showing remarkable resilience, or could it be that investors now consider that these problems come with the territory when buying into Ryanair. It was only last August when 20,000 flights were cancelled due to a rota issue which caused the stock to shed 15%. Within competition dwindling Ryanair still has a space in the industry, but it will need to tighten up its practices if it wishes to remain.

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