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FTSE Falls, Retail Sales Disappointment Raises Downside Risks for Sterling

18/06/2021 2:09pm

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Markets News: 

UK's Retail Sales Disappointment Raises Downside Risks for Sterling

Sterling investors are concerned about the U.K.'s worse-than-expected retail sales figures for May as the currency's recent strength has largely been driven by consumers spending savings accumulated during the lockdowns, ActivTrades says. Retail sales swung to a 1.4% decline in May; economists polled by the WSJ had forecast a 1.6% rise. On an annual basis, retail-sales growth slowed sharply to 24.6%, and came in below the 29.0% forecast in the WSJ poll. "This slowdown could mark the end of a 'Goldilocks' period for sterling, with the shine of a successful vaccination program wearing off, following the extension of the country's partial lockdown, and consumer spending receding as the end of furloughs looms," analyst Ricardo Evangelista says.

 
Companies News: 

Smartspace Software Wins Contract with Gategroup

Smartspace Software PLC said Friday that it has closed a new contract with Gategroup Holding AG for the use of its SwipedOn Visitor Management solution across the company's international estate.

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Sabien Technology Appoints Athan Fox Chief Scientific Officer

Sabien Technology Group PLC said Friday that Athan Fox has been appointed chief scientific officer effective immediately.

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Lekoil Nigeria Chairwoman, CEO Resign From Lekoil Cayman Board

Lekoil Nigeria said Friday three of its directors and executives have resigned from the board of Lekoil Cayman.

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Tesco 1Q Retail Sales Growth Slowed, Backs FY 2022 Profit Outlook -- Update

--Sales growth slowed down in its core U.K. market

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Lightsource BP Acquires 703 MW Solar-Project Portfolio in Spain

BP PLC's subsidiary Lightsource bp has acquired a pipeline of three solar projects in Aragon, Spain, totaling 703 megawatts of generation capacity.

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Braemar Likely to Book GBP900,000 Loss if Wavespec Buyer Doesn't Fulfill Obligations

Braemar Shipping Services PLC said Friday that it will likely book a 900,000 pounds ($1.3 million) non-cash loss from discontinued operations in fiscal 2022 if the buyer of its Wavespec business doesn't fulfill obligations.

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Serabi Gold Says It Won't Need to Restate Past Financial Accounts

Serabi Gold PLC said Friday that it won't need to restate past financial accounts after finding unauthorized cash withdrawals from its Brazilian subsidiary Serabi Mineracao SA.

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W Resources Gets GBP250,000 Investment From Chairman

W Resources PLC said Thursday that it has raised 250,000 pounds ($348,150) through a share subscription by Chairman Michael Masterman.

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Gulf Keystone Shareholders Re-Elect Chairman, CFO With Low Votes in Favor

Gulf Keystone Petroleum Ltd. said Friday that all resolutions at its annual general meeting passed, though two resolutions to re-elect directors passed with low votes in favor.

 
Market Talk: 

GlaxoSmithKline to Focus on Growth Outlook, New Spinoff's Prospects at Investor Update

1116 GMT - GlaxoSmithKline is set to lay out its strategy, its financial and growth outlook and review in-market and pipeline growth drivers when it hosts an investor update on June 23, Bank of America says. The British pharmaceutical company is also expected to provide details on capital-allocation priorities and dividend policy for the spinoff of its consumer health division, to be named New GSK, ahead of its planned separation in mid-2022, BofA says. The company is seen optimistic about New GSK's mid-term growth prospects, though this is likely already assumed in the 2021-2026 consensus of 5% sales and and 9% core operating income growth, the U.S. bank says.

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BOE's First Interest Rate Rise Expected in May 2022

1022 GMT - The Bank of England's first interest rate rise post-pandemic is likely to take place in May 2022, Bank of America economists say. They expect the central bank to raise the bank rate by 15 basis points to 0.25% in May 2022 and follow with quantitative tightening shortly after. "Policy is tied to forecasts that will inevitably shift with the data. And growth and inflation are outperforming BoE forecasts. We expect that to continue," they say. The U.S. bank had previously expected no interest rate rises through 2022.

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Food-Price Inflation Seen Posing Challenge for Tesco

0956 GMT - Tesco must deal with food-price inflation while it tries to bring down costs which shot up during the coronavirus pandemic, AJ Bell's Russ Mould says. The FTSE 100 grocer in April said it expects a strong recovery in profitability this year as the majority of pandemic-related costs it booked in fiscal 2021 won't be repeated. However, food inflation poses a fresh challenge as Tesco has to decide if it can pass on all extra costs to customers or risk a squeeze on profits, Mould says. "The forthcoming launch of Russian discount supermarket Mere in the U.K. will add to the competition, so Tesco needs to be very careful that any changes to its prices don't alienate its customers," Mould says.

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Tesco's 1Q Numbers Point to Normalizing Spending Patterns

0940 GMT - Tesco's 1Q numbers seem to suggest that U.K. consumers are normalizing their spending patterns and aren't necessarily reining in expenditure despite lingering economic uncertainty, Hargreaves Lansdown's Sophie Lund-Yates says. The FTSE 100 retailer said like-for-like general merchandise and clothing sales rose 10% and 52%, respectively, in the three months to the end of May after the pandemic hit demand during the same period last year, Lund-Yates says. "The shakedown in consumer habits hasn't finished yet, but this early indication could have positive connotations for other retailers," she says.

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UK Plans to Ease Restrictions for Fully-Vaccinated Travelers a Positive for Spain

0909 GMT - Plans by the U.K. government to allow travelers who have had two Covid-19 vaccines to skip quarantine upon their return to England would be very positive for Spain's tourism sector, Banco Sabadell says. In the case of IAG--which owns British Airways and Iberia among others--U.K. business represents 33% of global sales and this would support expectations the group would reach 60% capacity during 3Q, when compared with 3Q 2019, the Spanish bank says. For Spanish hotel chain Melia the U.K. represents 14% of EBIT, whereas for NH hotels the effect would be residual given that its business model is mostly city hotels, the bank says. Banco Sabadell has a buy rating on IAG. The company's shares in London are up 0.2% at 200.70 pence.

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Small Decline in UK Retail Sales Isn't a Reason to Worry

0907 GMT - U.K. retail sales unexpectedly fell 1.4% on month in May but given the biggest fall was in food stores, some of this might reflect people returning to eating and drinking outside of their homes, HSBC says. The retail sales decline was mainly driven by a 5.7% on-month drop in supermarkets. "What we may be seeing is the beginning of a rotation from spending on goods to spending on services," Elizabeth Martins, senior economist at HSBC, says. May's small decline follows a strong April, where volumes rose 9.2%, meaning levels of spending are still above pre-pandemic levels, Martins says.

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Tesco Says Unchanged Guidance Is Result of Continuing Uncertainty

0903 GMT - Tesco's reiteration of its guidance for fiscal 2022 is purely a reflection of market uncertainty for the rest of the year, the U.K. grocer's chief executive officer and chief financial officer say in a call with analysts. CEO Ken Murphy says it is unclear how Tesco's customers are going to respond to the lifting of the remaining coronavirus-related restrictions, whether or not they will be able to travel, what the outlook for the labor market looks like and what inflation will do. CFO Imran Nawaz says Tesco delivered a strong first quarter, but guidance hasn't changed because the market outlook remains uncertain. "None of that uncertainty has changed in the last six weeks since we last spoke to the market," Nawaz says.

 

Contact: London NewsPlus, Dow Jones Newswires; +44-20-7842-931

(END) Dow Jones Newswires

June 18, 2021 08:59 ET (12:59 GMT)

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