- Sunshine helps April retail sales growth of 1.2% smash expectations
- Consumer confidence stages fragile recovery
- Trump’s “big beautiful” tax bill weighs on bond yields
- But late pull back in US coupons boosts Asian stocks
- Brent crude down to $64 as traders brace for supply wave
Derren Nathan, head of equity research, Hargreaves Lansdown:
“The Footsie has that Friday feeling and looks set to end the week in an upbeat fashion, rising nearly 30 points at the open after some profit-taking yesterday. Despite ongoing worries about both the domestic and global economy, the index is set to close out five weeks of gains and remains in striking distance of all-time highs.
The retail sector has more spring in its step amid the latest data showing sales volumes rose 1.2% in April, smashing expectations, and posting a fourth consecutive month of increases. However, this growth was led by food stores, which retailers put down to the unseasonally sunny skies. It was not such a bright picture for non-food and clothing stores which saw volumes fall by 0.7%. With rain expected over the bank holiday, retailers will not be able to rely on fair weather shoppers to keep the tills ringing.
Retailers are likely to take some comfort from the GfK May consumer confidence survey, with the index picking up three points to minus 20 from April’s one-year low. Brits are feeling a little more comfortable with their savings levels, personal finances and the economic outlook. Better-than-expected economic growth, an interest rate cut, and the pull-back on tariffs could all have played their part. The improved optimism is reflected in demand for sausage rolls, mini breaks and trips to the pub, with Greggs, easyJet and Mitchells & Butler all coming out with solid numbers this week. Next week, it’s the turn of Pets at Home and DIY specialist Kingfisher to update the market. Investors will want to hear if the sun has also been shining on demand for dog toys and drills. But context is important. Things may be improving, but consumers are still feeling less bullish than they were a year ago, and rising inflation could dampen shoppers’ enthusiasm once again.
The end of week gyrations heading into the bank holiday break echoes a mixed session on Wall Street. The approval of Donald Trump’s “big beautiful” tax bill by Congress has pushed Treasury yields higher fuelling concerns about spiralling government debt, and with it the likelihood of further rate cuts by the Fed. The legislation still faces scrutiny by the Senate, but the President’s aides are targeting sign off by Independence Day. US Treasury yields did, however, pull back after American stock markets closed, as did oil prices, providing something of a tail wind to Asian stock prices.
Brent crude is now trading at around $64 per barrel, heading for its first seven-day dip in three weeks. Traders are bracing for a potential supply wave from OPEC+ producing nations and although a final agreement has yet to be reached, the group is said to be mulling over another 411,000 barrel per day increase in output for July
