After a welcome break from any data releases of note yesterday, at least for the UK, we were treated to domestic trade figures this morning that showed the UK’s trade deficit is the largest it has been since Q1 2008. Worryingly the gap between imports and exports has risen to £13.3bn from Q4’s £12.2bn. One of the main causes unsurprisingly a slow-down for British exports as global demand continues to dwindle. UK GDP growth has already been hit and many hope the recent weakening of the pound might salvage a small recovery. In contrast German trade data also released this morning showed the superior penalty takers hit an all-time high trade surplus, yet there are signs that overall economic growth for Europe’s largest economy is also slowing.
On the less talked about subject of the Brexit, the latest punch to be landed in the debate came from the snappily titled National Institute of Economic and Social Research (NIESR). The report has stated sterling will likely fall by around 20% in the immediate aftermath of an out vote. It also goes on to figure Britain’s economy would be 2.3% smaller by 2018 if we were to leave. This compares to the prediction that the economy would expand by 2.5% in 2018 if we were to stay.
The FTSE had a good start to Tuesday morning buoyed by rising oil prices and better than expected inflation data from China. April consumer inflation for China was below expectations and producer prices showed signs of moderating. Following this the FTSE had to let go of some gains after poor trade data and one or two reports that declared the UK’s economy could be significantly impacted, even immediately after a potential exit vote.
In company news, Easyjet reported a first half loss of £24m. This was despite growing passenger numbers and sales and against the numerous tragic terrorist attacks that has widely affected the tourism industry. (Running theme) the devaluation of the pound one of the main factors hurting profitability. At the end of today’s flight, Easyjet shares finished 2.72% higher.
Capita sat towards the top of the index for most of the day following a positive trading update. The support services company has issued raised expectations for the year ahead following a tough time of late that has seen the shares fall to two year lows. At the close of a mixed day, the FTSE 100 managed to hold on to respectable gains of 0.68%.