UK retail sales take a dive

There was a lack of higher tier data out of the United Kingdom yesterday which could have potentially eased some of the pressure off of the pound. There was, however, an array of lower tier data released from within the UK in the form of retail sales and mortgage approval figures published by the British Bankers Association (BBA). We saw a bearish reading released from the BBA showing a figure of 39.3K against the 41.5k consensus, signalling that the housing market is “continuing to cool”. Despite the fact that mortgage approvals were relatively high at the start of the year, the success rate has started to dip since June, with the number of mortgages approved for house purchases down 10% compared to this time 12 months ago. The number of homeowners remortgaging was also down, having fallen by 24% in September compared with the same month a year earlier.

Like the mortgage figures, we saw negative readings for year-on-year retail sales with a reading of 2.7% against the 2.8% consensus and considerably lower than this time last year when we saw readings of 3.7%. Bearish readings were also seen when the month-on-month retail sales figures were released down at -0.3% against the market view of -0.1%. The biggest contributor to the fall within the retail sales was the clothing and footwear sector - down -7.8% month-on-month. This is the biggest fall since April 2012. It will be interesting to monitor these figures moving forward and leading into the festive period. Expectations on high street revenue are generally heightened around the festive period – although we will likely see a lift in retail sales figures, some market participants are wondering whether the actual releases will fall short of expectation as retailers struggle to find the right balance on reducing prices to boost income. Based on recent results, this could become an eventuality – leaving Sterling at risk.

CB leading indicator figures were released showing a positive reading of 0.8% up from the consensus of 0.6% and well above the previous reading of 0.0%. This figure is released by the Conference Board and measures future trends of the overall economic activity across the board. This bullish reading backs up the majority of positive readings coming out of the States in the past few months which has led to it gaining against all its major counterparts.The latest manufacturing data from within the eurozone was released yesterday and was more positive than anticipated by most. As a result of this, we saw the euro claw back some of its recent losses against the pound and dollar.

We saw market manufacturing PMI readings of 50.7 which was well above the 49.9 consensus on top of the market services PMI figures released just above the 52.0 consensus with readings of 52.4. These figures were much needed and may suggest another recession isn’t quite as close as most anticipated – although not completely off of the cards. In addition to this good news from within Europe, it is worth noting that German Markit Manufacturing figures were from the previous reading of 49.9 with a reading of 51.8 suggesting factories in Germany are recovering from their recent slump. There was also positive unemployment survey figures showing the Spanish economic recovery is also picking up steam.

Stateside we saw the number of people who filed for unemployment assistance in the last week rise almost in line with market expectations. The number of individuals filing for initial jobless benefits in the week ending October 18th increased by 17,000 with readings of 283k up from the last showing of 266k and against the market expectation of 282k. Although this figure was ever so slightly higher than anticipated it did not have a huge effect on the markets. This could be partly due to the fact we saw bullish continuing jobless claims numbers released, with the actual figure showing 2.351m against the consensus of 2.380m. Housing price index was released at 0.5% by the Federal Housing Finance Agency which provides an estimated value of housing market conditions. Although it is only second tier data it is considered an important indicator into the state of the US economy. The reading is up from 0.2% last month.