Daily Market Report 18/02/2013

Retails sales data from Friday once again illustrate the unflattering state of the British economy and will no doubt reignite fears that the UK is headed for a triple dip recession.

Sales figures fell 0.6% for January against expectations of a 0.5% increase. One of the main factors behind the slump in sales stemmed from food sales, which were 1.6% lower in January, with grocers attributing the fall to the poor weather conditions we saw at the end of the month. However, the poor figures cannot solely be caused by adverse weather conditions. With inflation above the targeted 2% for much of the past four years and an environment of little earnings growth, consumer purchasing power remains under pressure with households presumably limiting their spending habits.

Eurostat revealed on Friday that euro zone trade surplus was €11.7bln in December, lower than an expected rise to €13.1bln, dampening demand for the single bloc currency.

Manufacturing shipments in Canada fell dramatically to 3.1%, far lower than an expected fall of 0.8%. Investors used this data as a reason to sell the Canadian dollar and lock in profits against the currency’s recent gains against the pound.

Data from the US showed that industrial production fell 0.1% in January against an expected rise of 0.2%, weighed down by weak manufacturing and mining.  However US consumer sentiment improved unexpectedly in February, with the optimism amongst households buoyed by signs of increased job hiring.

Data released this morning have shown that property prices in the UK only rose by 1.1%, less than the previous figure of a rise of 2.4%, causing the pound to weaken in early European trade. With the US markets closed for Presidents day and very little economic data due for release, markets will be expected to remain fairly quiet.

Key Announcements:

9.00am – EUR – Current Account: Expected to decrease to €13.6bln.

23.50pm – JPY – BoJ Monetary Policy Meeting Minutes.