The pound is gaining ground after a surprisingly strong retail sales figure. However, this highlights the focus on sales for consumers, denting margins on the high street. Meanwhile, the Spanish have called another election, after Catalan separatists failed to support the latest budget from the government on Wednesday.
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UK consumers go bargain-hunting
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Spanish set for fresh elections
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Theresa May loses another vote in parliament
A somewhat subdued start for European stocks has seen marginal gains in the UK counteracted by losses for the likes of the DAX. Overnight losses throughout Asia highlights a general lack of confidence that the US and China will reach a positive conclusion to trade talks when they are wrapped up today. With US retail sales taking a nosedive in January, we have also seen some worries creep in on the other side of the Atlantic. However, despite Brexit fears, we have seen UK retail sales outperform expectations, with a blockbuster 4.1% rise over the course of the year. While this sharp rise in retail sales in January is certainly welcome, it is notable that the two months which saw outperformance (November and January) are synonymous with sales, while the traditionally highly profitable month of December saw a sharp decline in sales growth. This provides further evidence of the ongoing difficulties on the high-street, where customers will buy strategically to ensure the lowest price, thus denting margins for retailers.
Spain is set for a third election in four years, after the prime minister, Pedro Sánchez called a snap election (28 April), following the failed bid to pass Wednesday’s budget. With his PSOE party holding just 84 of 350 seats in the Spanish congress, it was always going to be difficult to get the votes to pass his budget. Ultimately it came down to whether the pro-independence Catalan parties would support the government, and while Sánchez’s offer to hold talks with the parties was widely criticised, it was not enough for the separatists who continue to call for an independence referendum.
The pound has been gradually gaining ground, despite Theresa May losing yet another vote at parliament. The decision to reject her call to continue pushing for changes to the backstop means that discussions with the EU are going to be even tougher. After all, this has proven that even if the EU does provide last-minute concessions with the hope of breaking the deadlock, there is no guarantee that the UK parliament would even pass an improved offer.
Ahead of the open we expect the Dow Jones to open 54 points lower, at 25,385.
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