Interactive Investor

Must read: China data, UK retail sales, consumer spending

Our head of investment rounds up the morning's big news.

5th September 2023 08:37

Victoria Scholar from interactive investor

GLOBAL MARKETS

European markets have opened in the red, taking their cues from a weaker session overnight in Asia. The FTSE 100 is under pressure, dragged down by Ashtead Group (LSE:AHT) after the equipment rental company cut its annual UK revenue growth forecast.

Retail stocks like B&M European Value Retail SA (LSE:BME), Tesco (LSE:TSCO) and Sainsbury (J) (LSE:SBRY) are also near the bottom of the basket amid a busy day for economic data in the sector, with retail sales and consumer spending figures out this morning.

China’s Caixin services PMI fell to 51.8 in August, down from 51.9 in July, falling short of analysts’ expectations but still above the key 50-boom-bust divide. Meanwhile, the Reserve Bank of Australia kept its cash rate unchanged for the third straight month at 4.1%, in line with forecasts.

UK BRC-KPMG RETAIL SALES  

BRC-KPMG August retail sales rose by 4.1% year-on-year versus July up 1.5%. On a like-for-like basis, retail sales increased by 4.3%, hitting a 4-month high, versus 1.8% last month. 

Food sales increased by 8.2% over the three months to August, above the 12-month average growth rate, while non-food sales decreased by 0.2%. Health and beauty, food and drinks products enjoyed a boost over the summer, while clothing and footwear suffered weaker growth with families leaving it longer to stock up on school uniforms. 

These figures are not adjusted for inflation, suggesting that price increases rather than greater volumes could be responsible for the acceleration. Therefore, as inflation cools, retail sales could also retreat as the weather cools and energy bills rise, particularly during the lull between now and the all-important Christmas shopping season.

BARCLAYS CONSUMER SPENDING 

According to Barclays data, consumer spending on credit and debit cards grew by 2.8% in August year-on-year, down from 4% in July. The buzz around ‘Barbenheimer’, with a 101% surge in cinema spending was a bright spot, offsetting an even steeper deceleration. 

A drop in the headline rate of inflation, with some prices even falling, has contributed to the slowdown in consumer spending as pressures on budgets cool off a touch. Also, signs of economic weakness, with the pressures from high mortgage rates and softening PMI data, indicate that consumers may be less willing or able to spend as much amid the challenging macroeconomic backdrop. 

Wet weather conditions deterred consumers from heading to the high street, sheltering indoors rather than spending in shops, bars, and restaurants.

NOVO NORDISK 

Novo Nordisk A/S Class B (XETRA:NOVC) has become Europe’s most valuable company, according to Monday’s closing prices, surpassing luxury goods conglomerate LVMH Moet Hennessy Louis Vuitton SE (EURONEXT:MC)

This is thanks to hype around the Danish pharma company’s blockbuster appetite-suppressing weight-loss drug Wegovy which is now set to penetrate the UK market. It has already attracted a lot of interest, with strong demand landing tens of thousands of people on the wait list. Obesity is a major health threat in the UK, the US, and other countries, contributing to complications like diabetes and heart disease, which is why there’s so much excitement about this drug. 

Shares in Novo Nordisk have been rallying in August following a landmark study suggesting that the drug could reduce the risk of cardiac events like heart attacks and strokes by 20%. The stock has surged around 40% so far this year and more than 290% over the past five years, making it a standout stock market winner for short and long-term investors alike.

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