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UK Retail Sales Rise

UK retail sales rose higher-than-expected this morning having increased 0.5% on a month-on-month basis for April. This beat market expectations of a 0.3% rise and came after a 1.2% fall last month.

According to the ONS’ chief economist, “retail sales grew, partially rebounding from a poor weather-affected March, with jewellers, sports retailers and department stores all having a good month.” This higher-than-expected print also involved department store sales rising 1.7%, indicating a rise in discretionary spending as consumer confidence ticked up.

In April, government benefits also rose in line with September 2022’s level of inflation (10.1%) and thus additional income is thought to have helped lift some household finances. Food stores’ sales volumes for example rose 0.7%, though remained 2.7% below pre-pandemic levels. Last year, the ONS’ data indicated UK retail sales over 2022 witnessed their worst year since records began in 1997.

US GDP is Upwardly Revised

Yesterday saw markets weigh on an upward revision for US Q1 growth. US GDP grew 1.3% on an annualised basis over the first quarter of 2023, coming in above the last estimate of 1.1% print, but sharply down from last quarter’s print of 2.6%. While this was the third consecutive quarter that the US economy grew, business investment showed signs of drying up as interest rates continued to rise to their highest level since 2007. The figure was marked by consumer spending rising by 3.8% – demonstrating buoyed consumer confidence, despite protracted inflation and household budgets being squeezed.

Equities Update

Investor sentiment across US equity markets were buoyed yesterday on some progress made around debt ceiling talks. According to some sources the Republican and Democratic negotiators are just $70bn apart on a possible deal. AI related stocks were also lifted by chipmaker Nvidia’s share price rising some 24% following strong Q1 results. More generally, yesterday’s session saw the S&P 500 close 0.88% higher while the tech heavy Nasdaq rose 1.71%. In the UK however, the FTSE 100 ended Thursday 0.7% lower with the index being weighed down by the prospect of further hikes from the BoE.


Oil Prices Decline Following Novak’s Comments

Yesterday saw oil prices slide over 3% as the Russian Deputy Prime Minister Alexander Novak provided comments which contrasted with previous remarks from the Saudi energy minister around further possible cuts from OPEC+. Earlier this month, the  Saudi energy minister Prince Abdulaziz bin Salman would make further cuts ahead of their next meeting on 4th June. However, yesterday Novak seemed to downplay the prospect of these cuts saying that he did not think these were likely. WTI crude futures are currently trading around $72 dpb. Earlier this year, OPEC+ said that they would look to reduce output by some 1.16 million barrels per day from May until the end of 2023.


Behind the Headlines on US Corporate Profit Data

As Q1 GDP beat expectations, corporate profits over Q1 saw a considerable decline, falling 6.8% to their lowest level since Q2 2021. The scale of the decline far surpassed expectations of a 0.9% fall, though this data includes profits from the Federal Reserve which given losses on their gargantuan bond portfolio (brought about by rising interest rates), means the data is heavily skewed by the Fed’s weight. In fact, when we discount for the Federal Reserve, corporate profits hit an all-time high, though the pace of growth slowed from previous quarters.


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Nova Khakovka Dam Destroyed in Kherson, Ukraine

The vast Ukrainian Nova Khakovka Dam has been destroyed in the Russian occupied region of Kherson, Ukraine releasing a torrent of water as concerns for residents and nuclear power facilities up and downstream grows.

Think Tank Seeks Backing for UBI Trial

Plans have been unveiled for a Universal Basic Income (UBI) trial in the UK, with the think tank Autonomy currently seeking financial backing. It is hoped that the trial will span over two years with participants receiving £1,600 each month and being in control of how they spend or save the funds.

All Eyes on US Labour Market Data

Today all eyes are on US labour market data where the markets will be looking to gain an insight into the health of the US economy and the extent to which the jobs market is feeding into inflationary pressures ahead of the Fed’s meeting on 12 June.

House Passes Debt Ceiling Bill

Last night, the House comfortably passed the debt ceiling bill in arguably the most important stage in the process to ensure that the world’s largest economy averts a technical default. The House of Representatives cleared the Fiscal Responsibility Act by 314-117, the bipartisan deal assembled by President Joe Biden and House Speaker Kevin McCarthy.

Debt Ceiling Agreement to go to House Vote

Tonight, congress will vote on the bill agreed by President Joe Biden and House Speaker Kevin McCarthy, as the US tries to avert X-date by raising the debt ceiling. According to Reuters, “the deal caps federal spending and forces more poor people to work for food aid, concessions that Democrats hate. But it also preserves much of Biden's Inflation Reduction Act and punts the next debt ceiling showdown into 2025, which Republicans hate.”

Core, Blimey!

As markets weigh on the Bank of England’s interest rate decision on 22 June, this morning’s hotter-than-expected inflation print has seen investors upwardly revise rate hike expectations. Indeed, market reaction to this morning’s print is a further reaffirmation that inflation continues to be the hottest topic of conversation.

Erdogan Secures Another Five Years as Lira Plummets to Record Lows

The incumbent Recep Tayyip Erdogan has secured another five years as Turkey’s president following a run-off election which saw him take 52% of the votes, against Kemal Kilicdaroglu’s 48%

Germany Enters Technical Recession

The latest data from Germany indicates that their economy contracted 0.3% during the first quarter of 2023. Given that this follows a contraction of 0.5% seen over Q4 2022, Europe’s largest economy is now in a technical recession.

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