Must read: UK retail sales/consumer confidence, Microsoft/Activision Blizzard

GLOBAL MARKETS

On the final day of a major week for central bank action, European markets have opened lower following a mixed session overnight in Asia. The Bank of Japan kept rates unchanged at -0.1%, sticking to its ultra-loose monetary policy. Japan’s annual inflation rate hit a three-month low of 3.2% in August.

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UK RETAIL SALES 

UK retail sales fell by 1.4% year-on-year in August, missing analysts’ expectations for a drop of 1.2%. On a monthly basis, retail sales rose by 0.4%, also shy of estimates for growth of 0.5% but recovered from a drop of 1.1% in July. 

Food stores sales rebounded after the wet weather reduced clothing and supermarket sales in July. The improvement in weather conditions resulted in lower internet sales as shoppers headed back to physical stores in August. Automotive fuel sales fell by 1.2% in August, linked to the significant increase in petrol and diesel prices. 

While the value of overall retail sales rose by 3.8% in August year-on-year, volumes or quantity bought fell by 1.4% suggesting that price increases were responsible for the rise. Highlighting the impact of inflation, total retail sales were 17.3% higher than February 2020 pre-Covid but volumes were 1.5% lower.

UK CONSUMER CONFIDENCE 

The UK GfK consumer sentiment indicator rose for the second month in a row to -21 in September from -25 in August, reaching the highest level since January, but sharply below the long-run average of -10. In the survey of 2001 people, households’ expectations about their person finances improved as well as their views towards the economy over the next year. 

While consumer confidence remains low, it is showing tentative signs of improving. Individuals and families are still struggling amid the backdrop of elevated inflation and higher interest rates. But with inflation showing meaningful signs of heading back down towards target, and with the Bank of England at or close to the peak of the rate hiking cycle, consumer sentiment is starting to pick up.

A number of lenders have cut their mortgage offers this week with some offering five-year fixed rate deals below 5% again in an encouraging sign for home buyers. Supermarkets have been cutting prices to try to drive customers into their stores. And private sector wages surpassed inflation for the first time in two years last month, helping to improve living standards and reduce affordability pressures.

MICROSOFT / ACTIVISION BLIZZARD 

Microsoft Corp (NASDAQ:MSFT)’s proposed acquisition of Activision Blizzard Inc (NASDAQ:ATVI) appears to be inching closer towards securing regulatory approval in the UK. It comes after the Competition and Markets Authority (CMA) blocked the $69 billion deal in April. In August, Microsoft submitted a restructured proposal to the CMA. 

In its new proposals, Microsoft will no longer buy the rights to Activision’s games stored in the cloud, to address the CMA’s concerns about the impact of the deal on cloud game streaming. Instead, Activision’s games such as Candy Crush will be sold to games publisher Ubisoft Entertainment (EURONEXT:UBI) who will supply the content to Microsoft and its competitors. 

Today the regulator said the Ubisoft divestment, ‘substantially addresses previous concerns.’ It also said, "There are reasonable grounds for believing that the undertakings offered, or a modified version of them, might be accepted by the CMA.” Microsoft said it was ‘encouraged’ by this development. Activision said this ‘is great news for our future with Microsoft.’ 

This is a major step forward towards getting the deal over the line. Microsoft said it will ‘continue to work towards earning approval to close prior to the October 18 deadline.’ 

The tone has certainly turned a lot more positive, a shift from back in April when Microsoft’s president Brad Smith described the period as the tech giant’s ‘darkest days’ of working with the UK.