FTSE Set For A Softer Start Despite Retail Sales Surging
Fiona Cincotta July 24, 2020 7:17 AM
Concerns over the US economy and US-Sino relations are overshadowing soaring UK retail sales
Concerns over the economic recovery in the US and raising US – Sino tensions are dragging on investor sentiment at the end of the week. European bourses are heading for a weaker start on the open despite UK retail sales soaring.
Concerns over the economic recovery in the US are weighing on risk sentiment. Data yesterday showed that the US labour market recovery was stalling as the US struggles to get control of the coronavirus outbreak. The number people signing up for unemployment benefits saw a weekly increase to 1.4 million, up from 1.3 million. The weekly increase comes as parts of California and the sunbelt re-impose lockdown measures in an attempt to slow the spread of the virus.
Adding to the risk adverse mood, China ordered the closure of the US consulate in Chengdu, in a tit for tat move following the shutting of the Chinese consulate in Houston. Fears are growing over the stability of the Phase 1 trade deal.
UK retail sales surged in June, smashing expectations. Sales jumped 13.9% mom, adding to May’s 12% surge. This was well ahead of expectations for an 8% increase. The data shows that as lockdown measures eased and non-essential shops opened in the middle of the month, consumers were ready to spend. This is a very encouraging reading and boosts optimism surrounding a V-shaped recovery. However, as the government withdraws its support from the labour market, retail sales could quickly fall away. The Pound has lifted off session low and moved into positive territory at $1.2745.
PMI’s up next
Looking ahead PMI data will be in focus across the regions. The UK data is expected to be upbeat showing that activity in both the dominant service sector and the manufacturing sector expanded in July. If strong enough the numbers could boost optimism further surrounding a V-shaped recovery. Eurozone and US PMI data is expected to be similarly upbeat.
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