UK retail sales fall more than expected in September

Good morning,

• Encouraging PMIs from Germany and eurozone but France continues to disappoint;

• UK retail sales fall more than expected in September;

• Plenty of data and earnings for traders to get their teeth stuck into today.

US futures are pointing to a strong open despite receiving little direction from Europe on Thursday. Stocks in Europe are quite mixed as we approach the middle of the trading session, while in the US, the S&P is expected to open 13 points higher, the Dow 116 points higher and the Nasdaq 25 points higher.

We’ve had a mixed bag of data from Europe this morning which probably explains the lack of direction in the markets. Once again, the focus was largely on the eurozone and whether it can show any signs of delivering growth in the near future. Stagnation has almost become an accepted norm for the eurozone in recent years, with even marginal growth being celebrated.

Now that the stagnation has spread to the core and the region is at risk of falling back into recession, people are beginning to worry. It is vitally important that Germany leads the return to growth and unfortunately, all we’re seeing is the sad fact that it can no longer do it all alone. It’s time for the other big countries in the region to step up and if they don’t, we may have to get used to low growth in Germany.

Fortunately, the PMI readings for Germany and the eurozone this morning we’re a little encouraging. Unfortunately, the sick man of the eurozone has once again let the side down. France has been a constant disappointment throughout the crisis with its poor growth and refusal to commit properly to fiscal responsibility and reforms. We’ve seen another example of this recently with it drawing up a budget that falls outside of the eurozone’s agreed deficit reduction plan. If it was at least showing signs of returning to growth, people may be willing to overlook this, but it isn’t. The PMI readings this morning fell further into contraction territory, highlighting that things are likely to get worse before they get better.

UK retail sales figures were also disappointing but then again, unlike the eurozone, it is showing strong signs of growth and confidence remains high. A small decline in retail sales, while not being ideal given the UK’s dependence on the consumer, isn’t the end of the world. They’re still up 2.7% year on year and the country is expected to post growth of 0.7% in the third quarter when the figure is released on Friday. This equates to growth of 3% over the last 12 months.

Focus will now shift to the US where we have a combination of economic data and earnings being released. Jobless claims last week fell to a 14 and a half year low which helped to lift investor sentiment and spur the recovery in the stock market that until that point was looking pretty heavy. Another figure even close to this would provide further evidence that the US economy is on course for a strong 2015. Also being released is the manufacturing PMI for October, the CB leading indicator for September and the house price index for August so there’s plenty for traders to get their teeth stuck into. We’ll also get earnings from 45 S&P 500 companies, including Amazon and Microsoft so there’s certainly not shortage of events today.