Pound hits 10-month low as World Cup fever hurts UK retail sales - as it happened

Graeme Wearden

from on 2018-07-19 15:42 (#3V5HV)

All the day's economic and financial news, as UK retail spending disappoints and the Chinese yuan hits a one-year low

Latest: UK retail sales disappoint
Spending falls 0.5% in June, as soccer beats shopping
Pound falls through $1.30 to 10-month low

Earlier:

4.42pm BST

And finally, London's stock market got a small boost from the slump in the pound today.

The FTSE 100 has just closed seven points higher at 7683, a gain of 0.1%.

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.

3.53pm BST

Over in America, the number of people filing new claims for unemployment benefit has hit its lowest level in almost half a century.

The initial claims total fell by 8,000 last week to just 207,000, a level not seen since December 1969.

Agree, it happens thanks to the longest streak of job creation on record.

Check out that trend in initial claims (graph). pic.twitter.com/wFRqTvYybs

3.40pm BST

Donald Trump has belatedly spotted that Google has been fined (yesterday) by the European Commission for breaking competition rules in the mobile phone sector.

The president reckons it vindicates his criticism of Europe (who he called a 'foe' last week).

I told you so! The European Union just slapped a Five Billion Dollar fine on one of our great companies, Google. They truly have taken advantage of the U.S., but not for long!

3.17pm BST

The International Monetary Fund has weighed in on Brexit, warning that both sides would lose out if Britain left the EU without a deal.

The IMF estimate that Britain would suffer the biggest damage, losing 4% of its GDP. But Ireland would be nearly as badly hit, with the EU as a whole losing 1.5% of its economic output.

2.20pm BST

Royal Mail's shareholders have given the company a bloody nose.

Around 70% of votes cast by shareholders at today's the annual meeting were against the resolution on the director's remuneration report. That's a major rebellion.

BREAKING: shareholder revolt at Royal Mail agm: 70% of votes cast against exec pay arrangements.
34% vote against re-election of chairman Peter Long:
The director who chairs the pay committee responded:: pic.twitter.com/f9cHyN3vLg

2.11pm BST

Back on the drop in UK retail sales.... and Paul Mumford at Cavendish Asset Management argues that shops can't just blame the weather (or the football!):

While hot weather and sporting events have been a great boost for sales of waistcoats, it has clearly diverted shoppers away from some areas of the high street.

Other areas such as convenience stores might have seen an increase in footfall due to ice cream sales and ready-made meals.

1.50pm BST

It's official: Britain's Gaucho restaurant chain has gone into administration.

Deloitte have taken control of the Argentine-themed group, which employs 1,500 people.

Deloitte has confirmed steak restaurant chain Gaucho has fallen into administration with all 22 Cau restaurants set to close leading to the loss of 540 jobs

1.46pm BST

Just in: US media conglomerate Comcast has abandoned its plan to take over rival 21st Century Fox.

Brian L. Roberts, Chairman and CEO, Comcast Corporation, said, "I'd like to congratulate Bob Iger and the team at Disney and commend the Murdoch family and Fox for creating such a desirable and respected company."

1.27pm BST

Newsflash: Two former City traders have been sentenced to jail for conspiring to fix the Euribor interbank lending rate.

Reuters has the details:

Former star Deutsche Bank trader Christian Bittar and Philippe Moryoussef, who once worked at Barclays, were sentenced to jail by a London court on Thursday for plotting to rig global interest rates.

The two Frenchmen, friends outside work who went skiing together, were convicted of conspiracy to defraud by dishonestly manipulating the Euro interbank lending rate (Euribor), a benchmark for trillions of financial contracts and loans, between January 2005 and December 2009 for profit.

1.07pm BST

Last week, Britain was gripped by Donald Trump's working visit, including a glitzy dinner at Oxfordshire's Blenheim Palace.

Some business chiefs stayed away - perhaps nervous of being seen to kowtow to the US president, or simply deterred by his views on migration, protectionism or women's rights.

We engage with companies that we don't agree with everything they are doing. It's important that we engage with politicians and countries, particularly the US, which is such an important trading partner for the UK."

12.18pm BST

Here's my colleague Richard Partington on the retail sales data:

The World Cup and the summer heatwave kept British shoppers away from the high street last month, despite encouraging stronger sales of food, drink and barbecues across the country.

Revealing a surprise fall in retail sales in June, the Office for National Statistics said clothing stores and other non-food retailers suffered from reduced footfall amid the hot weather and football celebrations.

11.57am BST

The Financial Times also reckons the much-anticipated August interest rate hike is now in doubt, following June's weak retail sales figures.

The FT's Cat Rutter Pooley says:

The pound had been hesitant to test the $1.30 level, despite testing times for Theresa May's leadership - and her control of the Brexit process - and underwhelming UK inflation data on Wednesday.

The inflation data had already raised questions about the likelihood of the Bank of England being able to raise rates in August, as markets had expected, sending sterling down to $1.3008 on Wednesday before rebounding to $1.3068 at the close.

11.15am BST

Reuters is reporting that the pound has hit an eight-month low against a basket of rival currencies.

That's due to June's weak retail spending (which makes an August interest rate rise less likely) and anxiety over Britain's exit from the European Union.

11.13am BST

The pound is also losing ground against the euro, as the drop in retail sales in June disappoints the City.

Sterling is down 0.35 of a eurocent at a1.12, a four-month low, and bobbing around the $1.30 mark against the US dollar.

10.39am BST

The World Cup and the long sunny spell brought cheer to some shops, but gloom to others, says Andrew Westbrook, head of retail at RSM.

He explains:

With record breaking weather and the England team making a stunning start to the World Cup, you might have expected the feelgood factor to translate into bumper retail sales in June but you'd only be half right.

'Supermarkets appear to have been the big winners with the strongest three-month on three-month growth since May 2001.

10.26am BST

Encouragingly for small retailers, the amount sold by specialist food stores (including butchers and bakers) was up 25.3% in June compared to a year ago.

10.12am BST

Not even internet spending could save the UK retail sector last month, says Kathleen Brooks, research director of Capital Index.

She writes:

Although retail sales figures can be volatile, there is a growing sense that the UK economy is slowing down sharply, and with the political backdrop deteriorating, the Bank of England needs to have a pretty solid reason for hiking rates when it meets next month.

The details of the report are worth noting. Declines in UK sales last month were broad based with clothing and household goods leading the way. Not even the internet could boost the retail sales figures: non-store retailing saw volumes fall by 1.4%, and the annual rate for non-store or internet sales retreated to 9.8% in June, compared with 16.1% in May.

10.08am BST

Today's retail sales data shows that Brits spent 0.3% more at petrol stations last month -- due to rising fuel prices.

Food spending was flat, while non-food stores suffered a chunky drop in takings.

10.05am BST

UK retail sales could remain weak if the Brexit negotiations continue to struggle, warns ING economist James Smith.

Correction in #UK retail sales, but clear 2Q was much better than 1Q (the bar was low...). But once better weather + World cup effect fade, underlying challenges will resurface. Consumers still not confident - and "no deal" chatter will only increase concern about econ situation pic.twitter.com/AhFfAnGmHU

9.59am BST

Consumer spending has driven UK growth in recent years, but Simon French of Panmure Gordon reckons those days are over...

UK retail sales end Q2 on a mixed note. Volumes up by the largest amount since Q1 2015 at 2.1% YoY but stay-at-home shoppers pared back spending in June. With UK savings ratio near its 60Y low and real wage growth muted the chances of a return to 2015-2017 growth rates are slim pic.twitter.com/g4ZaXwTNcP

9.51am BST

Here's Jeremy Thomson-Cook, chief economist at WorldFirst, on the consumer spending slowdown:

Investors are not willing to back the pound with data disappointing and the political situation becoming even more fractured.

Once again, it may be easy to ascribe such a slip in sales to the recent good weather; the combination of the World Cup and the temptation of a pub garden will have kept the hospitality sub-sector buoyant but elsewhere trade will have been lacklustre.

9.47am BST

We've now learned this week that UK retail sales fell in June, inflation was flat at 2.4%, and wage growth slowed.

Is the Bank of England really going to look at this data and conclude that we need higher borrowing costs?

Probability of Bank of England raising rates next month now 50-50 after today's weak retail sales data, according to money market pricing. Was 55% yesterday, 80% last week.

9.45am BST

The retail spending picture is less gloomy if you look at the last quarter. Sales are up 2.1% in the April-June period, as Britain shook off its winter gloom.

Office for National Statistics senior statistician, Rhian Murphy explains:

"Retail sales grew strongly across the three months to June 2018 as the warm weather encouraged shoppers to buy food and drink for their BBQs.

"However, in June retail sales actually fell back slightly, with continued growth in food sales offset by declining spending in many other shops as consumers stayed away from stores and instead enjoyed the World Cup and the heatwave."

9.41am BST

June's disappointing retail sales have added to the Brexit anxiety enveloping the pound, says Naeem Aslam of City firm Think Markets:

The pound has come under brutal selling pressure as the retail sales data was extremely bad.

In simple words, the retail data has made the matter worst for the British pound which was already suffering from disappointing inflation number and a tumultuous week of politics.

9.37am BST

NEWSFLASH: UK retail sales shrank by 0.5% in June.

This is much weaker than the 0.2% growth the City expected, and dashed hopes that the warm weather and England's World Cup campaign would boost spending.

While hot weather and World Cup celebrations increased food store sales, it was suggested by retailers that these factors resulted in a decrease in footfall in non-food stores; which, along with non-store retailing, resulted in a monthly decline of 0.5% in the quantity bought.

Brutal selling pressure for #Sterling as the retail sales data was extremely bad pic.twitter.com/lgxmyHz43w

9.28am BST

Khoon Goh, head of Asia research at ANZ Bank, has spotted that China suffered a small capital outflow last month.

Not a serious level, but maybe a sign that some nervous companies or individuals are trying to move money abroad. That might intensify, if the yuan keeps falling....

China's net FX settlement incl forwards showed small outflow of $6bn in June. Cross border net payments in RMB had outflows of another $6.7bn. So far the capital outflow is modest. But considering the extent of #CNY depreciation, outflow pressures will be building. pic.twitter.com/MGmFpdcD6I

9.24am BST

9.20am BST

Some underwhelming earnings figures are weighing on Europe's stock markets today.

Advertising giant WPP has fallen almost 4% in London, after its French rival Publicis startled traders by reporting a drop in sales in the last three months.

9.09am BST

8.52am BST

Over in the City, shares in Sports Direct have slumped by almost 10% after it told investors its stake-building in department store chain Debenhams has kocked 85m off its profits.

Laith Khalaf, Senior Analyst at Hargreaves Lansdown, says the curious "strategic investment" has cost SPD dearly.

Sports Direct now owns 29.7% of Debenhams, just under the 30% threshold which would require a formal takeover bid.

The company has a string of such "strategic investments", which also includes House of Fraser, French Connection and Goals Soccer Centres, and it's hard to fathom the precise strategy at play here.

8.46am BST

The Chinese media are reporting that banks are being encouraged to boost lending, and support small firms.

It's a significant sign that Beijing is taking a more hands-on approach to stimulating the economy; understandably, given the disruption that new US tariffs on Chinese exports could cause.

The Chinese central bank will be buying (more) corporate bonds and China is doing more QE as the rest of the world's major central banks march toward tightening/policy normalisation.

8.45am BST

8.29am BST

The selloff is gathering pace, as traders spot that Beijing isn't intervening to prop its currency up again.

The yuanis now down 0.6% today at 6.7876 per dollar in offshore trading, a new one-year low.

"Gravity is doing its job again as monetary policy diverges further between US and China".

8.17am BST

Gao Qi, foreign exchange strategist at Scotiabank, blames the US-China trade spat for the yuan's weakness....and predicts it will continue.

"Market concerns resulting from uncertainty such as trade war continue to weigh on sentiment.

Investors will keep pushing the yuan to 6.8 per dollar. The PBOC will step in, if one-sided depreciation pressures are seen.

8.11am BST

China's central bank is deliberately letting the yuan depreciate, says Hannah Anderson of J.P. Morgan Asset Management.

"In contrast to earlier this year, today's weakness seems to reflect a more explicit policy decision. After signaling it would accept more volatility in the currency, the PBoC has followed up by lowering the daily fixing rate.

Policy makers' responsiveness to market pressures that have been building all year is encouraging, especially as China's financial system seeks to become more globally integrated.

7.50am BST

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

The Chinese yuan has hit a one-year low, as trade war fears continue to loom over the global economy.

The fixing "signals the PBOC is not defending any line in the sand for the exchange rate and is comfortable with gradual yuan depreciation," said Tommy Xie, an economist at Oversea-Chinese Banking Corp. in Singapore.

The signs of easing are "certainly not supportive to the yuan, and the currency may see another wave of selling pressures ahead."

We've had the feelgood factor of an England football team reaching the semi-finals of the World Cup as well as some scorching weather which is likely to have prompted some decent spending on big screen TV's, clothing, food and drink and gardening paraphernalia.

Unilever says ice cream sales are strong...but otherwise H1 results look lacklustre.. truckers' strike in Brazil, deflation in several European countries

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