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Retail sales weakened by more than expected in March as consumers reined in spending in response to spiralling living costs.
Today’s figures from the Office for National Statistics (ONS) showed that retail sales fell 1.4% last month, compared with City expectations for a 0.3% decline.
The ONS said that online sales were hit particularly hard due to lower levels of discretionary spending, while it also reported lower fuel sales as motorists cut back on journeys due to rising forecourt prices.
FTSE 100 Live Friday
Retail sales fall by more than expected
Shares lower on US rates rise speculation
Pound weakens further on economic gloom
Consumer confidence near record low
US stocks slide as investors prepare for Fed rate rises
14:53 , Simon Hunt
US stocks fell in the opening minutes of trading in New York as investors prepared for a potential tightening of monetary policy by the Federal Reserve amid rising inflation.
The S&P fell 0.8%, led by 1.7% losses in health care stocks.
The dollar edged up against the pound after reports of falling consumer spending in the UK.
Germany in danger of recession if Russia energy ban goes ahead
14:14 , Simon Hunt
Germany would enter into recession if the country bans supplies of energy from Russia, the German central bank has said.
The German economy would take a 180 billion euro hit, leading to a 2% drop in GDP, according to Bundesbank forecasts, with inflation set to be higher for a longer period.
It follows guidance released by the EU advising citizens to drive less and work from home more in a bid to reduce the bloc’s reliance on Russian energy.
Company insolvencies spike
13:24 , Mark Banham
The number of businesses going into insolvency in England and Wales more than doubled last month, according to official government figures, as the end of pandemic support begins to be felt.
The numbers of businesses being shuttered skyrocketed to 2,114 last month, up from 999 during March last year. The number was 34% higher than pre- coronavirus pandemic in March 2019.
Tailwinds of increased taxes, higher inflation and the ongoing war in Ukraine rattled the economy, as well as the end of pandemic-era support measures.
B&M boss leaving after 17 years
12:53 , Oscar Williams-Grut
The billionaire boss of low cost retailer B&M Value Retail is stepping down after 17 years in charge.
The company said Simon Arora, 52, will leave in 12 months once a successor is found.
B&M said Arora was leaving to plan for his retirement. He said it had been a “privilege” to lead the business and he was “immensely proud of the incredible journey that we have been on.”
Arora and brother Bobby acquired the Liverpool-based chain in 2004 and have grown it from 21 stores to 1,100. Brother Bobby Arora will remain as trading director of the business.
Ocado sinks to 2-year low on retail figures
12:43 , Simon Hunt
Ocado shares have dropped to their lowest price in two years on the back of poor retail sales in March.
Shares sunk 4% at Ocado and fell 2.3% at M&S, with whom the company has a delivery partnership.
Ocado’s market cap has more than halved over the past year as investors weighed the prospects of continued consumer demand for online deliveries following the easing of coronavirus restrictions.
Sainsbury’s shares stayed flat, while Tesco shares edged up 0.7%.
Consumer confidence plunge sparks recession fears
12:00 , Simon Hunt
A sharp decline in consumer confidence could mean a recession is looming, according to research by Bank of America.
Current consumer confidence levels, which reliably track consumer spending, suggest a 35% probability of recession, the research finds.
However, some analysts are hopeful the UK economy will be able to hold back from entering a recession.
Thomas Pugh, economist at RSM said: “Despite the huge drop in real incomes this year, we think the UK will narrowly avoid recession due to the strength of household balance sheets, a tight labour market and the timing of the peaks in inflation and bank holidays this year.
“However, the UK economy faces a difficult year regardless of whether the technical definition of a recession is met or not.”
Renault and Volvo warn on semiconductor shortages
11:15 , Simon Hunt
Two of Europe’s biggest car makers sounded the alarm on the global semiconductor shortage blighting the auto industry today, warning that war in Ukraine had made the problem worse.
French car maker Renault said its order backlog hit a 15-year high in the first quarter as a semiconductor shortage held up production. Volvo boss Martin Lundstedt warned of a “strained” supply chain, with war in Ukraine and the spread of Covid-19 in China making existing problems worse.
Renault’s first quarter revenue dropped 2.7% as production issues weighed and the company estimated a production loss of 300,000 vehicles in 2022.
Sweden’s Volvo held up better, with sales up 12% in the first quarter led by a 6% increase in truck sales. The manufacturer said it had been stock piling parts, which helped it navigate shortages in the first few months of the year.
Ukraine war sparks jump in charitable donations
10:59 , Oscar Williams-Grut
Charity donations have soared over the last month as Brits give money to help Ukrainian refugees.
Nationwide said its members gave £60 million to good causes last month, up 44% on February and 45% higher than March 2021.
Mark Nalder, Head of Payments at Nationwide, said: “It’s perhaps no surprise that this has coincided with the conflict in Ukraine as people have looked to donate money to support Ukraine and the humanitarian effort.”
Rate rise fears hit European markets
10:03 , Graeme Evans
Signs that US rate setters are preparing to quicken their response to rampant inflation put European markets on the back foot today.
The Federal Reserve is widely expected to raise interest rates by 0.5% in May, but comments by its chairman Jerome Powell last night fuelled speculation of further hikes of a similar size before the end of the summer.
Wall Street retreated sharply following Powell’s “front-end loading” remarks to an IMF panel, setting the tone for a weak session in Europe.
France’s presidential election and talk of a European Central Bank rates hike as soon as July meant Frankfurt and Paris-based markets fell more than 1%.
London’s FTSE 100 index proved more resilient as sterling weakness supported dollar-earning stocks and limited the top flight’s decline to 26.05 points at 7601.90.
Fallers included Scottish Mortgage Investment Trust, which dipped 14.6p to 917.4p on the potential impact of US rate rises on a tech-focused portfolio that includes Tesla and Amazon.
Pressure on mining stocks continued as more analysts revised price targets following some disappointing production updates. Anglo American was the biggest casualty, dropping 72p to 3607p after Swiss bank UBS cut to 3,000p.
Housebuilder Berkeley led the FTSE 100 after Jefferies hiked its target to 5587p, prompting shares to lift 133p to 4207p.
Weakness for retail stocks including Marks & Spencer meant the FTSE 250 index fell 71.35 points at 21,088.33.
But home repairs business Homeserve jumped 12% or 105.5p to 959p after revealing it has opened talks with Canada’s Brookfield Infrastructure about a potential takeover.
Ray-Ban owner boosted by summer sunglasses sales
10:02 , Oscar Williams-Grut
Holidaymakers preparing for their first proper summer getaway in two years have boosted Ray-Ban sunglasses maker EssilorLuxotica, with a 38% jump in first quarter sales to €5.6 billion (£4.7 billion).
The French giant said it has seen "double digit" growth in sales of Ray-Ban and Oakley branded glasses, as well as strong sales through its retail arm Sunglasses Hut.
Chief executive Francesco Milleri said the company was “off to a good sun season” as “demand for luxury brands continues.”
Shares are trading 1.7% lower in Paris.
Retail sales weaken ahead of utility bill shock
09:01 , Graeme Evans
The 1.4% fall in retail sales in March marks the second consecutive month of decline, with February’s figure also revised to 0.5% lower.
The largest downward contribution in March came from online sales, which dropped 7.9% month-on-month on top of February’s 6.9% deterioration. Capital Economics said one factor for this may be the continued shift in spending back towards pre-virus patterns, with online sales still 20% higher than February 2020.
However, a surge in prices in March resulted in a 3.8% month-on-month drop in fuel sales volumes as households pared back non-essential road trips. And sales at food stores were also down by 1.1%, marking the fifth fall in as many months.
Bethany Beckett, UK economist at Capital Economics, said: “The coming months are only likely to become more difficult for households as the cost of living crisis intensifies. After all, the March data predated April’s huge 54% rise in utility bills which will have hit household budgets hard.”
B&M 5% lower on CEO exit plans, M&S falls 3%
08:38 , Graeme Evans
Signs that US policymakers are preparing to move more quickly on tightening monetary policy put pressure on European markets today.
Indices in Paris and Frankfurt fell by about 1.5%, although the impact of the weaker pound on overseas earning stocks offered some protection in London as the FTSE 100 index declined by a more modest 0.6% or 46.92 points to 7581.03.
The concerns over US interest rates rising faster than expected were felt by tech-focused growth stocks such as Scottish Mortgage Investment Trust, which dropped 2%.
B&M European Value Retail slid by the most in the FTSE 100 after it emerged that Simon Arora intends to retire after 17 years running the business.
A regional chain of only 21 stores when it was acquired by Simon and brother Bobby Arora in December 2004, B&M now has over 1,100 stores across the UK and France. Shares dropped 5% or 26.4p to 523.6p.
The FTSE 250 index fell 0.5% or 106.35 points to 21,053, with consumer reviews business Trustpilot down 5% and Marks & Spencer off 3% after today’s weak retail sales figures.
In contrast, Homeserve shares jumped 10% after it said last night that it had entered into discussions with Canada’s Brookfield Infrastructure about a potential takeover.
Retail sales weakness hits sterling
08:10 , Graeme Evans
Today’s weaker-than-expected retail sales figure put more pressure on sterling, which fell 0.6% to a fresh 15-month low of 1.295 against the US dollar.
Until there’s clarity from the Bank of England on its approach to interest rates, CMC Market analyst Michael Hewson warned that a move towards 1.2800 looked possible.
He said: “This has become much more likely given the perception that the Federal Reserve seems more determined to squeeze down on inflation much harder.”
Hewson said today’s figures may deepen the split between Bank of England policymakers who want to see rates rise by half point and those preferring a more cautious approach.
He added: “The central bank has an unenviable task this summer, facing an inflation problem that it is behind the curve on, and having to consider raising rates further into the teeth of an economic slowdown.”
Consumer confidence near record low
07:51 , Graeme Evans
Consumer confidence is near a record low as the cost of living crisis hits home, the closely-watched monthly barometer produced by GfK revealed today.
The headline figure from GfK decreased seven points to minus 38, while the scores looking at the next 12 months for personal finances at -26 and the general economy at -55 are worse than the 2008 financial crash.
The survey’s Major Purchase Index also fell eight points to minus 32 as the current conditions prompt more Britons to think twice about their spending.
GfK client strategy director Joe Staton said: “When rising inflation and interest rates meet low growth and declining incomes, consumers will understandably be extremely cautious about any spending.”
Wall Street spooked by rate rise outlook
07:30 , Graeme Evans
The prospect of US interest rates rising by a half percentage point when Federal Reserve policymakers meet next month has sent a shiver through global markets.
Fed chairman Jerome Powell’s signalling of an aggressive stance on tightening monetary policy was hardly a surprise, but his comments to an IMF panel still provided the trigger for a big Wall Street sell-off after European markets had closed.
The Dow Jones Industrial Average lost earlier gains to finish 1.1% lower and the tech-heavy Nasdaq fell 2.1% after Powell said a half point increase was on the table as part of the Fed’s policy of “front-end loading” the fight against inflation.
This fuelled concerns among traders that the Fed might go harder for longer, with another two half percentage points hikes by the end of the summer.
Wall Street’s weakness means Europe markets are set to fall sharply, with CMC Markets forecasting that the FTSE 100 index will open 98 points lower at 7530.
Powell’s comments contributed to downward pressure on the price of oil, with Brent crude more than 1% lower at just under $107 a barrel this morning.