US Retail Sales, Dollar & Treasury Yields All Rise

Tuesday, 15 May: Overnight trading in Asia was hampered by investor profit taking in tech companies, reflective in the fall in Hong Kong’s Hang Seng (-1.13%).  After a shaky start the FTSE made gains over the course of the day (closing +0.16%) while major European indices followed the more muted tone. Tensions in the Middle East combined with hawkish Fed member comments pushed the dollar higher, while a second month of rising retail sales in the US contributed to dollar gains (GBP/USD -0.4% @ $1.35 at time of writing). A seasonally adjusted 0.3% (vs 0.4% expected by analysts) rise was recorded in April vs the prior month, with food and drink retailers and clothing and accessories stores both attributing to the rise. Spending in restaurants and bars declined 0.3%. Year on year, consumer spending is up 4.7% in April. Us bonds continued to sell off as 10-year Treasuries broke the 3% marker once again, up at 3.06% at the time of writing. Sentiment for a further 3 rate hikes from the Fed now stands at over 50% likelihood.  Physical Gold prices are falling c.1.9% currently as investors flock to yield bearing assets.

Closer to home, employment data this morning revealed the number of those unemployed in the UK remained at the lowest level in more than 40 years in the first quarter of 2018; unemployment rate was 4.2%, down from 4.6% from a year earlier. Wages for those in work have risen more than inflation for the first time in a year, up at an annual rate of 2.9% (inflation 2.7%). In total, 75.6% of people between 16-64 years are in work, the highest level since records began in 1971. The pound was largely unaffected by the data release as dollar strength dominated.

In more stock specific news in the UK, global specialist healthcare company BTG fell by more than 9% on the FTSE 250 after revealing it had swung in to a pretax loss in the fiscal 2018 year as impairment charges impacted results. Sales growth in expected to continue in the group’s oncology and vascular divisions, although tough comparables look set to disappoint further progress in the pharmaceuticals unit.

easyJet (+3.32%) hovered near the top of the main London index after releasing half year results ahead of expectations as revenue continued to rise following investment in new routes, although non-fuel costs remain high. Housebuilder Taylor Wimpey took poll position, up 3.69% at the close after declaring a special dividend in a further return of cash to shareholders. It means total dividends for the year will have increased 20%. Vodafone took the wooden spoon as investors focused on the news that the current Chief Executive is set to leave in October in the group’s full year results announcement.


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