Weak UK Retail Sales Could Hamper Sterling's Rise

Data showing an unexpected 0.9% fall in U.K. retail sales in August, against the consensus forecast in a WSJ poll for a rise of 0.8%, "may take some of the momentum out of the rise in U.K. money market rates and also GBP," ING says. The impact may be limited, however, as the weak figures are unlikely to prompt the Bank of England to "deliver a 'rate protest'" against market pricing of future interest-rate rises at next week's meeting, ING says. This is likely to leave GBP/USD gravitating around 1.3800 and EUR/GBP near 0.8500, it says. GBP/USD is last up 0.1% at 1.3801, having traded at around 1.3806 before the data. EUR/GBP rises 0.1% to 0.8535, versus around 0.8525 beforehand.

 
Companies News: 

Safestay Says Board Was Approached About Possible Offer

Safestay PLC said on Friday that the board has received a "very early stage and highly conditional approach" from a third party in relation to a possible offer for the company.

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Volvere 1H Pretax Loss Narrowed

Volvere PLC on Friday reported a significantly narrowed pretax loss for the first half of 2021, noting that its financial position continues to be strong, with high liquidity.

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Accsys Technologies Five-Month Performance Marked by Sales, Revenue Growth

Accsys Technologies PLC said Friday that its performance in the first five months of fiscal 2022 was strong, marked by growth in sales and revenue.

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Proton Motor Power Systems 1H Pretax Loss Narrowed Significantly

Proton Motor Power Systems PLC reported on Thursday a significantly narrowed pretax loss for the first half, noting that it is generating a positive gross margin.

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Steppe Cement 1H Pretax Profit, Revenue Rose

Steppe Cement Ltd. said Friday that pretax profit rose in the first half of the year as revenue increased.

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GoldStone Resources Shares Drop on Continued Halt to Gold Production at Ghanian Mine

Shares in GoldStone Resources Ltd. fell on Friday after the company said that it hasn't been able to start gold production at the Homase Mine in Ghana.

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NextEnergy Solar Fund Enters Into GBP100 Mln Joint Venture with Eelpower

NextEnergy Solar Fund Ltd. said Friday that it has entered into a 100 million-pound ($137.9 million) joint-venture partnership with Eelpower Ltd., a battery storage specialist in the U.K.

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Midatech Pharma 1H Loss Narrowed Sharply

Midatech Pharma PLC said Friday that its first-half loss narrowed significantly from the prior year.

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Live Company Posts Narrowed 1H Pretax Loss on Lower Exceptional Costs

Live Company Group PLC on Friday reported a narrowed pretax loss for the first half of 2021 but said revenue fell due to Covid-19 restrictions.

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Ashtead Group Notes Some Shareholder Opposition to Remuneration Policies

Ashtead Group PLC said Friday that resolutions relating to director remuneration got relatively low votes in support at its annual general meeting.

 
Market Talk: 

HSBC, StanChart Set to Benefit From Better Asia Outlook

0936 GMT - Asia-focused banks look set for a boost from better prospects in the region, Barclays says, raising its recommendations on HSBC to over-weight from under-weight and Standard Chartered to equal-weight from under-weight. Barclays says that while it prefers HSBC, both banks should benefit from an improving outlook, with revenue momentum set to accelerate. "We argue near-term growth concerns and China policy developments are driving weak valuations, limiting downside risk and under-appreciating sizeable upside potential. With both stocks trading at rare discounts, we see attractive entry points," Barclays analysts say, raising their price target on HSBC to 530 pence and on StanChart to 550p. Shares gain 1.6% to 375p and 0.2% to 442p respectively.

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BOE Communication Seen as Key as Two New Policymakers Join

0933 GMT - Bank of England officials face an "awkward moment for the U.K. economy" and communication will key to see which factors they prioritize in their policy decisions, says Luke Bartholomew, senior economist at Aberdeen Standard Investments. With inflationary pressures mounting at the same time that growth is slowing, the Bank may be facing a trade-off over which factors it prioritises, he says. While the new members of the Bank's decision-making body, Catherine Mann and Huw Pill, are unlikely to vote against the committee's majority in their first meeting, "investors will need to follow Bank communication carefully over the next few months, and brace for some volatility if we are indeed starting the rate hiking cycle next year," he says.

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BOE May Need to Signal if Market Rate Speculation Has Gone Too Far

0931 GMT - Money markets and U.K. sovereign debt are all pricing a higher chance of interest-rate rises next year, and the Bank of England may need to signal markets next week whether current speculation has gone too far, says Luke Bartholomew, senior economist, Aberdeen Standard Investments. "Speculation is mounting that the Bank will start to increase interest rates next year," he says. However, he thinks the current bout of higher inflation will prove to be transitory and that unemployment may increase around the end of the furlough scheme. "The Bank will need to signal to markets quickly if it thinks current hiking speculation has gone too far, otherwise it risks these predictions having a certain self-fulfilling logic," he says.

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Decline in UK Retail Sales Signals Shift to Services Spending

0903 GMT - The fall in U.K. retail sales in August reflects households spending more on non-retail categories as life returns closer to normal, after the Covid-19 lockdowns triggered a plunge in spending on services, Capital Economics' chief U.K. economist Paul Dales says. However, the decline in retail sales is still a source for concern as high-frequency data don't point to a surge in non-retail spending either, suggesting that some of the weakness may be due to consumers becoming more cautious as Covid-19 cases rise, he says. "The data suggest that the economy didn't regain much momentum in August after growing by just 0.1% on month in July, but a rise in non-retail spending will probably prevent GDP from declining," Dales says.

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Markets Overprice Prospect of BOE Rate Rises, Says Deutsche Bank

0818 GMT - Interest-rate markets are overpricing prospects of the Bank of England raising interest rates next year, says Deutsche Bank. "Rates pricing is consistent with 50 basis-point base rate by end of 2022 and a very flat curve hereafter implying 75 basis points as the long run terminal rate," DB's Sanjay Raja and Panos Giannopoulos say. The February 2022 overnight index swap, currently at 15.9 bps, is implying around a 70% chance of a 15 basis-point increase, they note. "Whilst of course a February [rate] hike could materialize, it is far from a foregone conclusion." The analysts estimate a rate increase in February should be less than 50% priced at this stage given the net balance of risks.

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UK Retail Sales Decline Reflects Supply Constraints, Demand Rotating Into Services

0801 GMT - August's fall in U.K. retail sales reflects demand rotating into services, HSBC's senior economist Elizabeth Martins says. U.K. retail sales fell 0.9% on month in August, the third decline in four months. "U.K. retail sales volumes are still higher than pre-pandemic, but having had a roaring start to the reopening period, they have lost some momentum," Martins says. The rotation into services is evident on the food sales side, she says. Sales in food stores fell 1.2% on the month in August, while Open Table data showed restaurant bookings increased and, according to the Office of National Statistics, social spending did too. The drop in retail sales also reflects supply constraints, as consumers can't buy what isn't on the shelves, Martin says.

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BOE Expected to Keep Policy On Hold

0756 GMT - The Bank of England is expected to keep monetary policy on hold at next week's meeting. "It remains too early to expect a further hawkish pivot from the Monetary Policy Committee at this stage," says Deutsche Bank. Growth has slowed materially and while hiring, unemployment and job vacancies have been positive, "the scale of furloughed staff remains worryingly high with only weeks to go on the furlough scheme," DB's Sanjay Raja and Panos Giannopoulos say. The likely uncertainty around labour market slack combined with the slowdown in demand and uncertain health outlook could weigh on the final Monetary Policy Report later this year, they say.

 

Contact: London NewsPlus, Dow Jones Newswires; Write to Sarka Halas at sarka.halas@wsj.com

(END) Dow Jones Newswires

September 17, 2021 05:59 ET (09:59 GMT)

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