FTSE 100 on the rise as UK Retail Sales receive euro 2020 boost

Markets are continuing their recovery today, with markets largely disregarding a disappointing UK PMI report. Thankfully, the UK retail sales picture has improved as England’s Euro 2020 success drove up food and alcohol sales.  

• European markets push higher after dovish ECB -stance.

• UK retail sales receive Euro 2020 boost.

• Decline in UK PMI survey highlight staff shortages. 

European markets are continuing their ascent, with Monday’s collapse becoming a distant memory as traders and investors buy the dip in style. Yesterday’s ECB meeting provided fresh confidence for bulls, with the bank promising to remain “persistently accommodative” until their inflation target it consistently met. With the ECB previously forecasting CPI of 1.3% in 2023, we are clearly looking at a bank which worries less about runaway inflation than the Fed or BoE. In the midst of a period dominated by earnings reports, today has seen a fixation on economic data thanks to UK retail sales and European PMI releases. The pound has been enjoying a brief bounce against the dollar of late, yet that strength is fading despite the better-than-expected retail sales reading this morning. While there are questions around high-street retail demand despite government steps to reopen the economy, the saving grace appears to have come from football fans who drove up alcohol and food sales for the Euro 2020 tournament. Restrictions limiting pubs to tables of six pushed many to watch the tournament at home, and with England’s final three games of the tournament falling in July it is likely we will see a similar boost next month. 

The UK PMI releases saw a significant step back in July, with the recent reopening efforts doing little to boost growth in services and manufacturing growth. For manufacturers, the lack of available staff and raw materials damaged production levels, with the PMI falling to a four-month low. With the UK gradually opening up to international holidays, it appears that many businesses are hindered by a belated raft of summer holidays being utilised after a year largely devoid of any such trips. With Covid cases on the rise, there is a fear that the UK economy will also feel the pinch as people are told to quarantine as advised by the government. With the Covid app notifying over 600,000 people in England and Wales to isolate this week, it is clear that the surge in Covid cases will hinder economic growth despite the recent removal of restrictions.  

Ahead of the open we expect the Dow Jones to open 125 points higher, at 34,948.