August 26, 2022

Daily Report 26/08/2022

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The UK CBI retail sales index posted a strong recovery to a 9-month high of 37 for August from -4 previously and well above consensus forecasts of -8. Retailers also expect solid gains for September, although companies overall were still pessimistic over the outlook and there was no change in the underlying narrative. Underlying confidence surrounding the UK economy remained very weak, especially with a fresh surge in gas prices for the day. Political pressure will intensify on Friday after the official OFGEM announcement on the price cap for retail energy prices from October with intense pressure on the Conservative Party leadership contenders.

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The August German IFO index edged lower to a 2-year low of 88.5 from a revised 88.7 previously, but significantly above consensus forecasts of 86.8. The current assessment edged lower at 97.5 from 97.7 with the expectations component marginally lower at 80.3 from 80.4.The IFO stated that a recession is still on the cards with trade sentiment very negative given the burden from high inflation and the Institute forecast that GDP would decline 0.5% for the third quarter. It did, however, add that there was positive news with a significant easing of supply-chain bottlenecks. ECB minutes stated that the risks of medium-term inflation had increased and the risk of longer-term expectations becoming unanchored had also increased.

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US second-quarter GDP was revised slightly to a -0.6% from the flash reading of -0.9% and confirming a second quarterly contraction.Initial jobless claims declined slightly to 243,000 in the latest week from 245,000 previously and below consensus forecasts of 253,000 while continuing claims declined to 1.42mn from 1.43mn. The overall impact was limited with market caution ahead of Fed Chair Powell’s speech on Friday.

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14:00 FED Chair Powell speech