Interactive Investor

Must read: FTSE 100, bond sell-off, oil, China, UK retail sales

The blue-chip index was lower for the sixth straight session, says our head of investment Victoria Scholar.

18th August 2023 09:09

by Victoria Scholar from interactive investor

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European markets have opened lower following a weak session in Asia and declines on Wall Street with the Nasdaq shedding over 1%. The FTSE 100 is under pressure for the sixth straight session with China-sensitive stocks such as Standard Chartered (LSE:STAN), Burberry Group (LSE:BRBY) and miners such as Antofagasta (LSE:ANTO) and Anglo American (LSE:AAL) in the red, pricing in concerns about the Chinese economy. 

Bond markets sold off with the US 30-year yield hitting a 2011 high and UK and German yields also touching multi-year peaks. This followed the Fed’s minutes, which pointed to the potential for further monetary tightening as the US economy proves to be more resilient than expected. The greenback bulls are back in the driving seat with the US dollar index on track for its fifth weekly gain, also supported by the prospect of further Fed rate hikes.

Oil is set to snap its seven straight weeks of gains, on track to close the week lower, spooked by China worries and the potential for further monetary tightening stateside.

Markets were under pressure overnight in Asia. China’s property giant Evergrande filed for bankruptcy protection in the US, highlighting the ongoing strain on China’s real estate sector. Meanwhile, the People’s Bank of China has been supporting the yuan, setting a much higher than expected daily fixing to support the currency. It comes after the Chinese yuan slumped to a nine-month low this week.

In Japan, its annual inflation rate hit 3.3% in July, beating analysts’ expectations for 2.5%, lifting the yen against the US dollar and the euro.


UK July retail sales fell by 3.2% year-on-year in July, missing analysts’ expectations for a drop of 2.1%. On a monthly basis, retail sales fell by 1.2%, versus a gain of 0.6% in June and falling short of forecasts for a drop of 0.5%. Excluding fuel, the figures were also light compared to consensus estimates.

The wettest July since 2009, the cost-of-living crisis and higher prices all dampened demand for both food and non-food items. Supermarkets, department stores and household goods sales suffered. However, the rain provided a boost to e-commerce sales with shoppers opting to spend online rather than having to brave the elements. And stronger fuel sales partially offset the overall weakness.

The volume of goods bought remains 1.8% lower than February 2020 before the onset of the pandemic while in value terms, total retail sales are 16.4% high. This reflects the harsh reality that consumers are having to spend more pounds to purchase fewer items because of price inflation.

Major UK retailers such as Kingfisher (LSE:KGF), Sainsbury (J) (LSE:SBRY)’s and Associated British Foods (LSE:ABF) are under pressure this morning.

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