UK Shares slip back in thin post-holiday trade
Britain’s top share index slipped back in early trade on Thursday as traders returned to work after a two-day festive break, tracking overnight falls on Wall Street, with all eyes staying on key U.S. budget talks. Major tax hikes and spending cuts known as the “fiscal cliff” will come into force on January 1 unless the White House and Democrat-controlled Senate and the Republican-run House of Representatives reach a budget deal to avoid an abrupt economic slowdown.
Retailers were in focus as employee-owned John Lewis reported a strong increase in sales in the week leading up to Christmas, boosted by online orders as internet shopping accounts for an ever growing slice of Britain’s retail spend. Sales in the week to December 22 at the country’s biggest department store group rose 26.5 percent to 157.8 million pounds compared with last year. Its website broke its daily sales record with 7.8 million pounds on December 17. Clothing retailer Next, which next week kicks off the sector’s post-Christmas trading updates, gained 0.1 percent, but rival Marks & Spencer fell 0.2 percent.
On the FX Markets, the UK calendar has been relatively busy this week, but provided little in the way of surprises. Tuesday’s inflation report passed by without providing any new information for the GBP, as yearly CPI prints in line with consensus at 2.7%, and BoE minutes were well telegraphed ahead of time, as Miles rears his head as the sole member looking to ease further. None of the risk events for the UK have had any lasting impact on the currency, with USD weakness mid-week prompting multi-month highs at 1.6307, before a tempering of risk appetite via Boehner’s announcement Thursday evening brought the pair closer to 1.6200 before Friday’s close. UK GDP figures ended the week on a sour note, after production and service sectors dragged down the final reading to 0.9% for Q3. Additionally, cross-buying in EUR/GBP has led the pair to close in the red on Friday, closing in on 1.6200.