The FTSE 100 (^FTSE) nosedived into the red on Friday as retail sales in the UK surprisingly dropped in May.
Retail sales volumes in Britain declined by 1.4% between April and May 2021, new figures showed, as the reopening of hospitality venues hit spending at food shops.
This was below economists’ expectations of 1.6% growth, but shoppers still have an estimated £200bn ($277bn) in pent-up savings to spend, the Office for National Statistics (ONS) said.
The data revealed that the largest contribution to the monthly decline last month was from food stores such as supermarkets – sales volumes fell by 5.7%. Despite this fall, food store sales remain higher than their pre-pandemic level, with sales in May 2021 2.6% higher than in February 2020.
“Retailers might be a little disappointed that momentum has fizzled a little, but all that socialising does bring opportunities,” said Danni Hewson, AJ Bell financial analyst.
“If people are out and about more there’s more chance people will get back to a spot of impromptu buying, lured in by tantalising window displays. There will be disappointment from retailers that social distancing measures will remain in place a little longer but queuing outdoors is less of a hardship when the sun is shining.”
Read more: Retail sales record surprise fall in May
The pound (GBPUSD=X) continued to sink against the dollar on Friday, with the currency on track for a 1.6% weekly fall due to the strength of the dollar.
“This slowdown could mark the end of a ‘Goldilocks’ period for sterling, with the shine of a successful vaccination program wearing off, following the extension of the country’s partial lockdown, and consumer spending receding as the end of furloughs looms," Ricardo Evangelista, senior analyst at ActivTrades, said.
The greenback pushed higher this week after hawkish comments from the US Federal Reserve.
Michael Hewson, chief markets analyst of CMC Markets, said: "In what can only be described as choppy trading conditions, sentiment was given an additional knock this afternoon on the back of comments from St. Louis Fed President James Bullard who said he was leaning towards a US rate rise in 2022, much sooner than Wednesday’s changed “dots” of two by the end of 2023.
"While Bullard may be not a voting member this year, he is a voting member next year, and as such his vote will count, furthering muddying the time line for markets as to when the Fed will move in response to inflation concerns."
Last night, the Dow finished lower for the fourth day in a row, and is on course for a second successive weekly decline. The Nasdaq finished higher, however, with the prospect that we could see a fifth successive weekly rise.
Watch: Wall Street dips as Fed signals rate hikes
On Thursday, new data showed that the number of Americans filing fresh claims for jobless support rose to 412,000 last week for the first time since April. Economists were expecting another fall to around 359,000.
This was an increase of 37,000 from the previous week’s 375,000, the lowest since the start of the pandemic, following a six-week run of falling jobless claims. The jump in claims was concentrated in three states – Pennsylvania, California and Kentucky.
Asian shares were mixed on Friday but were set for a weekly loss. In Japan, the Nikkei (^N225) fell 0.2% after four sessions in the red, while the Hang Seng (^HSI) rose 0.7% and the Shanghai Composite (000001.SS) ended flat.
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