Daily Market Report - 22/05/2015

GBP
The retail sector smashed expectations as warm weather encouraged shoppers on to high streets across the UK last month. Retail sales volumes (excluding fuel) were up 4.7 per cent year-on-year, gaining 1.2 per cent from March, beating economist expectations of 3.7 per cent and 0.4 per cent.
 
This was driven by textiles, clothing and footwear, which saw volumes increase by 5.2 per cent month-on-month, representing the largest increase since July 2010. Additionally amount spent (or value) rose by 2.2 per cent year-on-year and 3.3 per cent month-on-month. Sunshine may have warmed clothing sales however economists have said that other factors such as rising employment, wages as well as low inflation were also at play.
 
"The sunshine added to a variety of factors that are helping retailers enjoy an upward sales trend, including record employment, improving wage growth and, perhaps the most important of all, falling prices," Chris Williamson, chief economist at Markit, said.
 
The retail price deflation - which shows the prices of goods sold in the retail industry - decreased 3.6 per cent. Fuel prices fell by 11.5 per cent while food prices slipped 0.1 per cent. Britain fell into deflation for the first time since the 1960's in April boosting consumers spending power - nonetheless economists have warned this won't last long meaning Britons should enjoy it while they can.
 
EUR
Euro zone business growth was weaker than expected this month but firms increased staffing levels at the fastest rate in four years, suggesting they were becoming increasingly optimistic.
 
Any signs of growth, alongside the survey showing firms barely cut prices after reducing them for over three years, will cheer European Central Bank policymakers coming just two months after they launched a trillion-euro stimulus program.
 
Markit's Composite Flash Purchasing Managers' Index, based on surveys of thousands of companies and seen as a good growth indicator, fell to 53.4 from 53.9, missing the 53.8 forecast.
 
Demand from abroad for the bloc's goods soared as customers took advantage of a weaker euro making the products cheaper. The manufacturing new export orders index jumped to a 13-month high of 53.0 from 52.3. Euro zone prices were flat year-on-year in April, ending four months of falls, official inflation data showed this week.

USD
Purchases of previously owned homes unexpectedly fell in April, a sign the industry’s recovery remains uneven. The rising prices and a limited supply of properties, combined with too-small growth in pay and lingering concerns about taking on too much debt, are holding the market back. Signs that younger Americans are forming families and venturing out on their own remain a bright spot that could propel a rebound in the housing industry down the road.
 
The median price of an existing home climbed 8.9 percent from a year earlier, the biggest 12-month gain since January 2014. While increasing property values hurt affordability for prospective buyers, they help bolster owners’ household wealth and build confidence among those whose homes are still worth less than their mortgages.
 
The Markit Economics preliminary May index of U.S. manufacturing unexpectedly declined to 53.8, the weakest reading since January 2014, from 54.1 a month earlier, the London-based group said Thursday. A figure above 50 for the purchasing managers’ measure indicates expansion. The median forecast called for the index to climb to 54.5. The group’s measure of orders decreased to 54.2 in May, also a 16-month low, from 55.3 in the prior month. The gauge of factory production fell to the weakest level this year.
 
The survey adds “to fears that the strong dollar is weighing on the U.S. economy and hitting corporate earnings,” Chris Williamson, chief economist at Markit, said in a statement. “Export sales have now dipped for two straight months, something not seen for two years.”
 
Other reports on Thursday showed the average number of Americans filing for unemployment benefits over the past four weeks dropped to a 15-year low and the index of leading economic indicators rose in April by the most in nine months.

Key Announcements
9:00 - EUR - German Ifo Business Climate
12:00 - GBP - BOE Gov Carney Speaks
13:30 - USD - CPI m/m
13:30 - USD - Core CPI m/m  
14:30 - EUR - ECB President Draghi Speaks
14:30 - GBP - BOE Gov Carney Speaks
18:00 - USD - Fed Chair Yellen Speaks

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