Sentiment improves as China prepares to go to Washington

After heavy falls for the miners in the previous session, today the miners were the top sectorial gainer as metal process rebounded. News that China is sending a trade delegation to Washington for the first attempts at trade talks since the US levied tariffs on $50 billion of Chinese imports has boosted optimism that a deal between the two powers is still a possibility, even if a distant opportunity. Notably senior Chinese officials won’t be in attendance, showing a level of caution from China over the ability of the two sides to reach a deal. However, for the markets it’s a step in the right direction.

Football Sunshine & Discounts Help UK Retail Sales Jump
UK retail sales surprised to the upside, as England’s extended run in the World Cup, particularly warm weather and summer sales unexpectedly lifted sales. Retail sales increased 3.7% year on year in July, well above the 2.7% forecast, meanwhile on a monthly basis, sales increased 0.9%, significantly higher than the 0% increase forecast. The pound rallied on some much-needed good news, jumping to a high of $1.2750.

Whilst the retail sales data is good news for retailers, such as Marks & Spencer which is trading close to the top of the FTSE leader board today, there was also a darker side to the numbers for the high street. With non-store sales jumping by a substantial 4.9%, primarily thanks to Amazon Prime Day in mid-July, the dominance of the e-tailer is stark. With UK earnings growth still sluggish, prices elevated and confidence levels low, the outlook for the high street remains challenging. Retail sales are notoriously volatile, and it is more likely that this outstanding month’s data is a one off rather than a new norm.

UK Sales Help Offset Weaker Performance in France At Kingfisher
A winner from the sunnier weather was Kingfisher, the owner of B&Q and ScrewFix, which saw a 6% increase in sales in its UK division in the three months to July. The hot weather saw demand for items such as fans, hosepipes and paddling pools soar helping sales in B&Q jump 3.6% and Screwfix increase 5.5%. These figures will inject a dose of confidence into the markets as Travis Perkins considers selling off its Wickes chain. The question now will be whether Kingfisher has done enough over the summer to see it through what is expected to be a long difficult winter ahead, to avoid a fate similar to rival Homebase which plans to close 42 stores. If the French side of the business doesn’t see some improvements soon then the next 12 months could be tough for the firm.

Kingfishers’ share price was in fact down following the results, which was down to a poor performance in France, where sales declined 3.8% due to lower footfall.