- FTSE 100 falls as retail sales dip more than expected
- US business activity dampens hope for interest rate cuts
- Ralph Lauren’s outlook disappoints amid weak US demand
- GSK wins in latest Zantec action
- Oil price stabilises around $81 on demand outlook
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:
“Retail sales have sunk by far more than expected in the UK. There was a highly disappointing 2.3% decline in April, from a 0.2% dip in March. Clothing retailers have been particularly badly hit, with wet weather raining on efforts to get customers spending on new spring/summer wardrobes. Sports equipment and furniture stores were also met by weaker footfall, as the gloomy weather didn’t spark enthusiasm for house and garden touch ups, or exercise. This unfortunate data set has contributed to the FTSE falling 67 points at the open, as investors assess the health of the UK economy.
Over in the US things are also more downbeat, despite NVIDIA’s recent results sparking a resurgence in the AI rally. Data has shown that business activity is at a two-year high in the US, which could give the Federal Reserve pause when it comes to deciding to cut interest rates. S&P Global showed its flash US Composite PMI Output Index, which tracks the manufacturing and services sectors rose to 54.4 this month. That’s the highest level since April 2022 and was driven by higher Services activity.
Ralph Lauren beat quarterly estimates, but its revenue outlook has left a lot to be desired. The group’s enjoying stronger demand in Europe and Asia, but a pullback is rearing its head in the important US market. Despite this, overall performance looks to be improving. That’s being helped by lower cotton costs and reduced discounting, which are helping to offset increased freight expenses and Red Sea disruption. Overall, Ralph’s brand position is in a tough spot, it’s not quite high end enough to be insulated from the US’ economic troubles, but it’s also too expensive to catch consumers who are on a strict budget.
GSK has had a meaningful victory in a personal injury suit in the US. As a manufacturer of heartburn treatment, Zantac, GSK is facing legal action against claims the drug causes cancer. The latest case saw the jury decide Zantac was not responsible for the plaintiff’s disease. There are still many hurdles to clear before the pharmaceutical giant can declare itself free from this overhanging cloud, but this is a step in the right direction. The group would be able to stomach potential damages, but the ongoing uncertainty is the market’s primary focus.
With stronger-than-expected US PMI data, and the reduced expectations for Federal Reserve interest rate cuts this year, Brent crude’s demand outlook has softened. That’s seen the price stabilise at around $81 a barrel. The next important date for the calendar is the OPEC+ meeting on 1 June, which is likely to see key producers extend production cuts.”
