FTSE 100 hits one-month closing low; pound slides against strong dollar – as it happened

Graeme Wearden

from on 2021-06-18 18:43 (#5K7GN)

Rolling coverage of the latest economic and financial news

Latest: FTSE 100 posts biggest fall in more than a month as US dollar surges
Inflation and interest rate fears grip markets
Fed's Bullard: Inflation higher than we expected

Earlier:

Retail sales fell unexpectedly in Great Britain in May
Food store sales volumes dropped 5.7% last month
Capital Economics: We've swapped shopping for socialising
Clothing sales also lower

8.08pm BST

Some very sad news tonight. Economist Howard Archer, the Chief Economic Advisor to the EY ITEM Club, has passed away.

Oxford Economics, who Howard joined in 2017, announced this evening that he had died after a brave battle against cancer.

I worked closely with Howard in recent years providing technical support to the ITEM Club, which he led with distinction. He was a very insightful analyst of the twists and turns of UK economic data and a skilled forecaster. He was also incredibly dedicated to his craft - still publishing right up to the end of his life - and generous in sharing his experience with others, to whom he was a much-loved colleague."

It was a real privilege to work with Howard. His passion, work ethic and enthusiasm shone through in everything he did, and he was an inspiration to those who worked with him. He made an invaluable contribution to the EY ITEM Club as our chief economic advisor over the last four years, and he was rightly highly regarded in the world of economics and among our people and clients. He will be sadly missed, and all our thoughts are with Howard's family, friends and colleagues.

It is with great sadness we announce that our colleague Howard Archer, who was the Chief Economic Adviser to the EY ITEM Club, has lost his brave battle against cancer. Howard will be deeply missed and our thoughts are with his family. pic.twitter.com/N9PcpnUNVH

Incredibly sad news. Howard Archer has died. He was a fount of economic knowledge with a ready soundbite for every data point imaginable. RIP.

Very sad news that Howard Archer has passed away. His thoughtful economic analysis was a constant for all the time I've been writing about the UK, and he will be much missed. RIP.

Such very sad news. Howard Archer was a really good friend and an exceptional analyst of economic data. He will be sorely missed by all his friends, fellow economists and all the journalists who quoted him so regularly. Very sad that he has left us so prematurely. https://t.co/mfZfEueiIF

Not sure anyone spent more time patiently explaining macroeconomics to journalists than Howard Archer. A lovely, patient man, and a sad loss. https://t.co/3HZ4QrCIjQ

Sad news indeed about Howard Archer - such a valued stalwart of the UK economic analysis scene - really hard to imagine it without him https://t.co/N7U7ODnFEl

Truly awful news. Condolences to his family & friends. RIP Howard.

Oh no, I'm so sad to hear this. He was so lovely as well as quick and helpful. So sorry for his family and friends

7.43pm BST

That's all for today, and this week. Here are today's main stories:

6.45pm BST

Here's our news story on today's market moves:

4.50pm BST

After a day of heavy selling, the FTSE 100 has closed down 136 points at 7017 points, a tumble of 1.9%.

That's its lowest closing level in almost a month, since May 19th, and its biggest one-day fall in over a month.

It's been a disappointing end to the week for stock markets in Europe, with the after effects from Wednesday's Fed decision still reverberating, wiping out any prospect of gains in a week that saw new record highs for both the DAX and Stoxx600.

In what can only be described as choppy trading conditions, sentiment was given an additional knock this afternoon on the back of comments from St. Louis Fed President James Bullard who said he was leaning towards a US rate rise in 2022, much sooner than Wednesday's changed dots" of two by the end of 2023.

4.08pm BST

Deloitte will allow its 20,000 UK employees to choose how often they come into the office, if at all, after the pandemic, making it the latest firm to throw out the rulebook and embrace ultra-flexible working.

The accounting firm said it would let staff decide when, where and how they work" following the success of remote working during the Covid crisis. While the company has offered more flexible working since 2014, the latest announcement will mean ditching its office-focused approach once the final phase of lockdown restrictions are lifted next month.

We will let our people choose where they need to be to do their best work, in balance with their professional and personal responsibilities,"

4.05pm BST

Stock markets are being by a mini taper tantrum', says Fawad Razaqzada, market analyst at Think Markets.

It is turning into a bit of a black Friday for risk assets in what looks like a mini taper tantrum.

Already lower on the day, stocks losses accelerated after the Fed's Bullard admitted that it is natural we have tilted a little bit more hawkish."

4.04pm BST

The pound is on track for its worst week against the dollar since last September, points out Reuters.

Here's their take:

Sterling extended its fall against the U.S. dollar on Friday, dropping below $1.39, hurt by the U.S. Federal Reserve's hawkish surprise and an unexpected fall in Britain's retail sales.

The pound dropped against a strengthening dollar on Thursday after the Fed surprised markets by signalling it would raise interest rates and end emergency bond-buying sooner than expected.

3.50pm BST

The dollar has hit a new two-month high against a basket of major currencies, as it continues to benefit from the prospect of earlier US rate rises.

This has driven the pound down to $1.382, its weakest point since the start of May.

3.39pm BST

Global indices plummeting but #oil trading higher, a pity oil shares very weak bizarrely. #bp and #rdsb have added to both today. Dollar very strong but #brent #oil trading higher at $73.75 a barrel.

3.38pm BST

Most of the 30 stocks of the Dow are in the red, with pharmaceuticals chain Walgreens Boots Alliance (-3%), chipmaker Intel (-3%), investment bank Goldman Sachs (-2.7%) and financial services group American Express (-2.5%) leading the fallers.

Bucking the trend are cloud CRM software firm Salesforce.com (+0.45%) and Microsoft (+0.4%), benefitting from the rotation out of value' stocks and back into growth' stocks (fast-growing tech firms).

3.06pm BST

Stocks have opened lower in New York, with James Bullard's hawkish comments hitting the mood.

The S&P 500 index which covers a broad swathe of the market, is down around 1% or 40 points at 4,181 points, away from this month's record highs.

Market taking early dive after St. Louis Fed Prez James Bullard told CNBC he thinks there'll likely be a rate hike by the end of 2022. I can't imagine that anyone is truly surprised by this. Just an excuse to grab some profits. #DOW -393

The reflation trade which saw investors rotate out of high growth and into value stocks looks to be unwinding. As the tech heavy Nasdaq hit a fresh record high on Thursday, the Dow broke below a key support.

The timing of this unwinding is interesting, because it comes as the Fed indicates towards tighter policy. Usually, higher interest rates are supportive of gains in cyclicals and value stocks. Perhaps the Fed has calmed the market that inflation won't overheat?

2.26pm BST

The selloff is accelerating in London, pulling the FTSE 100 down to its lowest level in two weeks,

The blue-chip index fell as much as 120 points, or over 1.6%, to 7032.5 points, its lowest since early June.

What the Fed's meeting also told us was that once inflation expectations become unanchored, it's a tough job to re-anchor them

UK Retail Sales declined in May as the euphoria felt from shops reopening in April shifted to higher spending on eating out in May, as indoor dining reopened. Retail sales declined 1.4% MoM in May, after surging 9.2% in April. Expectations had been for a 1.6% rise.

The figures are slightly disappointing, but retail sales are volatile and even more so now as the economy is re-opening. After April's immensely strong read, a softer May, particularly given the awful weather and the re-opening of inside hospitality isn't so surprising.

1.52pm BST

Federal Reserve Bank of St. Louis President James Bullard has declared that US inflation has been stronger than anticipated, in an interview which has pushed Wall Street futures lower.

Speaking to CNBC about Wednesday's FOMC meeting, Bullard said recent economic data has been stronger than the Fed expected, meaning the committee is now a little more hawkish [a majority of officials now expect rates to rise in 2023]

The committee has been surprised to the upside over the last six months".

We were expecting a good year, a good reopening, but this is a bigger year than we were expecting, more inflation than we were expecting, and I think it's natural that we've tilted a little bit more hawkish here to contain inflationary pressures.

"The committee has been surprised to the upside over the last six months ... now we're seeing 7A% real GDP growth, faster than China has grown in recent years ... it's natural that we tilted a little more hawkish here to contain inflationary pressures," St. Louis Fed's Bullard. pic.twitter.com/TDHcoxcSIv

"I put us starting in late 2022 ... my forecast said 3% inflation core PC in 2021 and 2.5% core PC inflation in 2022," St. Louis Fed President James Bullard on his dot plot. pic.twitter.com/MSSKarhoIv

Jim Bullard on CNBC just admitted the Fed made a "somewhat hawkish move" on Wednesday. Just in time for the growth boom to turn to bust and price pressures to dissipate. Great timing!

Market awash in red after St. Louis Fed Prez James Bullard told @CNBC that the voting committee was inflation was more intense than expected, and that he expects the first rate hike in 2022, ahead of the new forecast calling for two in '23. #DOW -327

Equities sliding on the hawkish picture being painted by Bullard pic.twitter.com/pY5vC3uyeH

12.45pm BST

Stocks are heading lower in Europe, with the FTSE 100 now down 80 points or 1.1%, and Germany's DAX off around 0.9%.

A disappointing retail sales figure has done little to help elevate an already depressed pound. However, that weak pound has done little to lift the FTSE, with markets continuing to feel the residual effects of Wednesday's FOMC meeting.

European markets are heading towards the weekend on the back foot, with declines for the likes of the Dow and S&P 500 highlighting the ongoing concerns that rising inflation could soon curtail the expansive monetary policy mix around the world.

12.32pm BST

The pandemic has hit Starbucks' UK coffee shops, with losses hitting 41m last year as sales slid during the lockdown.

Starbucks slumped to a 41m loss in the UK in the past year as the Covid-19 pandemic took its toll on the coffee shop chain.

The company published its latest results with Companies House which showed revenues in the year to September 2020 fell 243m, down 32.7% due to the heavy restrictions imposed during much of the year.

12.11pm BST

Tesco has warned that sales are likely to fall in the UK - including online - as customers return to more normal behaviour by eating out and attending the office, my colleague Sarah Butler reports.

The supermarket reported a 0.5% rise in sales in established UK stores in the 13 weeks to 29 May, down from an 8.8% rise in the previous quarter.

11.13am BST

Sterling dipped to a new six-week low against the US dollar this morning, after the retail sales figures showed a dip in May.

The pound fell below $1.386, for the first time since May 6th, before recovering back to near $1.39 - down a quarter of a cent.

The pound lost ground versus other major currencies during early Friday trading, following the publication of May's retail sales figures for the UK, which fell short of expectations. Investors looked at last month's performance of the retail sector with some concern, as the country's economic recovery, and the strong performance of the pound, have to a large extent been driven by consumers spending savings accumulated during the months of lockdown.

This slowdown could mark the end of a Goldilocks' period for sterling, with the shine of a successful vaccination program wearing off, following the extension of the country's partial lockdown, and consumer spending receding as the end of furloughs looms.

10.50am BST

British food and drink exports to the EU fell by 2bn in the first three months of 2021, with sales of dairy products plummeting by 90%, according to an analysis of HMRC data.

Brexit checks, stockpiling and Covid have been blamed for much of the downturn, but the sector has said the figures show structural rather than teething problems with the UK's departure from the EU.

The loss of 2bn of exports to the EU is a disaster for our industry, and is a very clear indication of the scale of losses that UK manufacturers face in the longer-term due to new trade barriers with the EU."

10.48am BST

ByteDance, the Chinese parent of TikTok, more than doubled its revenues last year as usage of the hugely popular video app boomed.

10.30am BST

Over in Germany, factories have hiked their prices at the fastest rate since the financial crisis, partly due to more expensive metal products and wood.

#Germany's producer prices rose 7.2% YoY, the most since 2008. The chart from @destatis shows, while base effects are at work, price increases have been accelerating across the board. pic.twitter.com/MBXB7sFtFR

Compared to May 2020 intermediate goods' prices increased especially regarding metallic secondary raw material (+69.9%), sawn and planed wood (+38.4%) and metals (+23.1%).

Prices of basic iron, steel and ferro-alloys increased by 33.6%, prices of non-ferrous metals were up 26.6%.

Germany PPI month-on-month at 1.5% https://t.co/yMMMv6CvYq pic.twitter.com/ndilAjfui3

Copper prices are down 15% in just over a month. pic.twitter.com/C5zI2LXrWe

10.05am BST

The London stock market has made a subdued start to trading.

The blue-chip FTSE 100 is down 33 points or 0.45% at 7120 points, away from the 15-month high seen earlier this week.

Oil prices continued downwards, fueled by the rising US dollar value, making dollar-priced oil more expensive and discouraging investors amid the resurgence of virus cases in the UK https://t.co/ilzFD4WTSj pic.twitter.com/w2XrClTXMP

Markets were relatively calm on Friday as investors took time to digest the Federal Reserve's shock earlier this week that US interest rates might go up sooner than previously expected.

The FTSE 100 slipped as oil producers and financials gave up some of their recent gains. Industrials and miners were among the top risers, including Rio Tinto which staged a small recovery after being in a falling trend since the start of June. China recently said it would release metal reserves to calm a strong rally in commodity prices, and this has weighed on the mining sector in general.

9.28am BST

Supermarket giant Tesco has also provided evidence that the surge in food shopping is slowing as the lockdown was relaxed.

While the market outlook remains uncertain, I'm pleased with the strong start we've made to the year and continue to be excited about the many opportunities we have to create value over the longer term."

We're clearly very keen for the government to find a sustainable solution for the Northern Irish protocol with the EU and we're waiting with interest ... we're looking forward to a resolution," Tesco CEO Ken Murphy told reporters after the group updated on first quarter trading.

He said product availability at Tesco's 50 stores in the province is currently really good".

We don't anticipate any change" - the CEO of the UK's largest grocer doesn't seem very excited by the potential that has been unlocked by the new trade deal agreed between and .

Ken Murphy from Tesco was asked what benefits he thought shoppers would feel.

Tesco boss Ken Murphy says the supermarket is trialling "frictionless shopping" (aka cashierless stores like Amazon Go) at its headquarters shop. Also expanding its 1hr delivery service Whoosh to 12 stores & rolling out Deliveroo at 260 One Stop shops.Tesco does 1.3m orders a wk

8.46am BST

The decline in retail sales in May shows households are spending less time shopping and more time socialising, says Paul Dales of Capital Economics:

The 5.7% m/m decline in food sales is a sure sign that instead of eating every meal at home as we all did during lockdowns, the reopening of indoor hospitality on 17^th May meant we spent money on eating in cafes and restaurants instead.

And the 2.5% m/m fall in clothing sales suggests that some of us spent less time in Primark and more time in the pub.

We still suspect that GDP in May rose by 1.5-2.0% m/m as spending shifted from the shops to social activities. But it's possible that the soft retail sales data could mean May wasn't as strong for the economy as we had thought

Rather than suggest the economic recovery is already spluttering, the decline in retail sales in May is probably just a result of the reopening of indoor hospitality in mid-May prompting households to spend less time shopping and more time socialising. https://t.co/KtYVcXzijt pic.twitter.com/yOSCbVQiJ7

8.32am BST

Retail sales down 1.4% m/m in May.

Evidence of diverted rather than additional consumer spending in the month with grocery & online sales declining as people headed back to restaurants and bars as restrictions eased.

Retail sales still up by 24.6% y/y. https://t.co/SJlzqZHfZ6

8.29am BST

Automotive fuel sales grew by 6.2% month-on-month in May, as the relaxation of lockdown measures led to people travelling more.

From May 17, England eased the rules on gatherings, meaning groups of up to six people or two households can meet indoors, and overnight visits are allowed. Groups of up to 30 are now allowed outdoors.

8.17am BST

Sales also dropped at clothing stores (-2.5% month-on-month) and department stores (-6.7% m/m) in May.

That suggests that demand moderated after the initial reopening rush in April, as the lifting of lockdown restrictions encouraged spending in restaurants rather than shops.

Clothing and department stores both reported monthly declines of 2.5% and 6.7% respectively.

However, both declines follow strong growth in previous months and the three month on three month growth to May 2021 highlights the continued recovery in these sectors with growth of 28.9% and 12.6% respectively.

8.07am BST

May's retail sales figures are a slight disappointment after the fireworks' of April's spending splurge, says Jonathan Sparks, CIO, UK and Channel Islands, Private Banking and Wealth Management at HSBC:

The broader picture suggests that consumers released pent up demand for the high street in April but then moved on to socialising and eating out in May, as restaurant bookings surged and pubs re-opened.

Even with today's blip, retail sales are 9% higher than before the Covid pandemic and 15% up from January's low.

The FTSE 350 Retail index has pulled back from the May high, as the Delta variant became more established, throwing some doubt on whether the pace of consumer spending can be sustained. We'll have to wait and see how this unfolds in the coming weeks, but for now there is enough positive economic momentum to justify our positive outlook on UK stocks."

7.57am BST

Here's some snap reaction to the dip in retail sales last month, from economist Julian Jessop:

Collectors item! some weaker than expected UK data: #retail sales *fell* 1.4% m/m in May.

But...

1. distorted by fall in shop sales of food and drink as #hospitality reopened

2. overall sales still well above pre-#Covid levels after much larger increases in earlier months pic.twitter.com/aZsXrybYyz

UK retail sales in May (-1.4% MoM) largely a function of diverted spend back to hospitality & away from food retailers, also a levelling off of retail reopening in April. BUT total CHAPS-recorded spend on credit & debit cards has now plateaued since mid-April. One to watch. pic.twitter.com/SnxdZDyhbV

7.49am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Retail sales across Great Britain have fallen unexpectedly in May as the reopening of hospitality venues hit spending at food shops, and online.

...anecdotal evidence suggests the easing of hospitality restrictions had had an impact on sales as people returned to eating and drinking at locations such as restaurants and bars.

Feedback from retailers suggested that sales were negatively affected in May by both the reopening of all retail sectors and the relaxation of hospitality restrictions, with specialist retailers of alcoholic drinks and tobacco reporting a monthly decline of 8.4%.

.... anecdotal evidence from retailers suggested increased spending on outdoor garden furniture in preparation for the summer and the relaxation of social gathering rules.

Discussing UK retail sales -1.4% m/m in May...anyone else running just in time delivery on paper towel and toilet rolls? No need to stockpile groceries at the moment. #Covid_19 #retail

Commenting on today's figures, Director for Economic Statistics Darren Morgan said: (1/4) pic.twitter.com/qHTRbdMBGm

Darren Morgan continued: (2/4) pic.twitter.com/Mmnh8ZKg4d

Darren Morgan added: (3/4) pic.twitter.com/IhgJClQ91i

Darren Morgan concluded: (4/4) pic.twitter.com/PUkAmtrYXV

European Opening Calls:#FTSE 7147 -0.09%#DAX 15706 -0.14%#CAC 6664 -0.03%#AEX 734 -0.14%#MIB 25684 -0.12%#IBEX 9191 -0.06%#OMX 2272 -0.04%#STOXX 4157 -0.04%#IGOpeningCall

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