The third UK economic release in three days has shown a sharp increase in retail sales for the month of July and has sparked a rally in the pound. This morning’s data followed the trend set by the previous two in coming in above expectations and has caused the biggest reaction in the currency which has risen by around half a percent against the US dollar in the last hour. Meanwhile the FTSE 100 has pared some early gains following the news, in part due to the currency appreciation.
Consumer spending soars post-Brexit
The headline read for retail sales in July rose by 1.4% month on month, which is sharply higher than analysts forecasts, with a consensus calling for a meagre 0.1% rise. The data in June - which was misattributed by some as showing adverse effects of the EU referendum despite it focusing mainly on the time period before the Brexit vote- was disappointing coming in at -0.9%, so some of the drastic rise can be explained away by the month on month nature of the release. Nonetheless, the absence of a bad print would have gone some way to allay fears of a slowdown since the 23rd June, and to beat so strongly is an encouraging development.
UK to avoid recession?
Prior to the release, ratings agency Moody’s revealed that they expected the UK to avoid recession despite the shock caused by the referendum outcome. Moody’s commented that the rebound in the stock market in particular shows that fears were exaggerated and in light of this have revised their growth forecast for 2017 down by a smaller adjustment than many feared from 1.5% previously to 1.2%. Further comments state that the weaker pound and looser fiscal policy will help the economy and due to this they predict that the UK will be nowhere near recession this year.
Miners head the FTSE 100
The best performing stocks on the UK blue-chip index this morning come from the mining sector with Antofagasta (LON:ANTO), Anglo American (LON:AAL) and BHP Billiton (LON:BLT) the top three. The weakness seen in the US dollar of late, which depreciated further last night following some slightly dovish FOMC minutes, gives these firms a de facto boost and has contributed to an impressive week of gains so far. Admiral Group (LON:ADML) is also higher and has recouped some of yesterday’s losses following the warning in its latest trading update that the EU referendum has affected the business adversely. As far as the fallers are concerned, Pearson (LON:PSON) and British American Tobacco (LON:BATS) are the furthest in the red and the only two stocks that are off more than a percent at the time of writing.