Walid Qudmani, chief market analyst at financial brokerage XTB, says:
Concerns continued after the pound hit a 37-year low against the dollar, with the sterling-dollar pair down 1% and touching a low of $1.135.
While the dollar’s strength is certainly at play and the Fed is taking decisive action to rein in inflation, the perilous situation the UK economy finds itself in, further illustrated by today’s retail sales report, is not helping either. The Bank of England has a tough job ahead of it as it has to strike a balance between managing inflation, supporting the currency, while also having a more negative impact on the overall economy.
The 1.6% fall in British retail sales last month was three times more than economists had expected and was the worst drop since December 2021. This was the latest bad news for Sterling.
John Hardy, head of currency strategy at Saxobank, told Reuters:
The background of all the grinding that’s going on is weighing on sterling, the UK is running these huge external deficits and the concerns around the new Prime Minister’s policies will add to that.
New Prime Minister Liz Truss last week announced two years of huge increases in energy costs, one of the measures that could cost the UK more than £100bn.
Sterling fell to a new 37-year low against the dollar as a sharp fall in British retail sales raised fears of a recession.
The pound fell more than 1% to $1.1350, and lost 0.5% against the euro to €1.1407.
Another reason is the strength of the dollar – the greenback has strengthened against many major currencies as the US Federal Reserve has raised interest rates significantly, offering better returns to investors. The dollar index, measured against a basket of currencies, was up 0.5% this morning.
The Fed is expected to raise interest rates by a further 75 basis points at next Wednesday’s meeting, a day before the Bank of England is set to raise rates by 50 basis points.
Germany put the German subsidiary of Russian oil giant Rosneft under state control by buying three refineries into trusteeship ahead of partial European sanctions on Russian oil at the end of the year. Philipp Oltermann reports in Berlin.
The federal network regulator will become Rosneft Germany’s interim trust manager and stake in its refineries in Schwette, Karlsruhe, and Vohburg, Bavaria, near Berlin, Germany’s Economic Affairs Ministry announced on Friday.
Rosneft is the country’s largest single oil refiner, accounting for about 12% of Germany’s crude oil production capacity.
German Chancellor Olaf Scholz on Friday will unveil more details of a package to support the Schwet refinery and “guarantee the reliability of oil supplies through alternative routes,” the announcement said.
Crucial to the Berlin-Brandenburg region, the refinery on the Polish border still relies on supplies of Russian oil to Europe via the Soviet-era Druzhba (“Friendship”) pipeline.
UK and European shares are falling following a sharp fall in British retail sales and a global recession warning from the World Bank.
The FTSE 100 index in London fell 31 points, or 0.4%, to 7,251, while Germany’s DAX slipped 1.4%, France’s CAC slipped 1% and Italy’s FTSE MiB fell 1.6%.
Retail sales in Britain fell by a more than expected 1.6% last month, in another sign the economy is slipping into recession, as the cost of living – high inflation and falling real wages – bite. Sales fell in fashion stores, supermarkets and supermarkets – one of the few categories to see growth in alcohol and tobacco.
Fashion retailers including Asos and Primark owner Associated British Foods, along with online grocer Ocado, have warned their profits in recent days.
“Consumers are buying more easily to offset the price increase,” he says. Lisa Hooker, Industry Leader of Consumer Markets at PwC. She explains:
For the first time, grocery sales have fallen below pre-pandemic levels, taking out the effects of inflation, prompting shoppers to be more wasteful and more careful about what they put in their trolleys.
Other categories, such as fashion, also fell below pre-pandemic levels, although it rebounded in early summer as consumers rushed to buy new clothes for the workplace and holidays and events postponed from the pandemic.
As we approach the crucial Golden Quarter ahead of Christmas, retailers will be eagerly anticipating next week’s low budget results. The prospect of energy price caps and tax cuts could boost volatile consumer spending, but businesses will increasingly need help easing rising utility costs. This is in addition to input price inflation and wage hikes they already have to contend with.
Longer-term, high street business rates seek signs of improvement, with index-linking likely to reduce any appreciation gains and add to next year’s costs.
The sharp fall in British retail sales means “the economy is already in recession,” says Olivia Cross, assistant economist at Capital Economics.
Retail sales will continue to struggle in the coming months as the cost of living tightens. But the Bank of England still needs to raise interest rates significantly.
A fall in retail sales in August more than reversed the revised 0.4% monthly increase in July. Sales are down in every major category and the ONS reports that higher prices are prompting households to reign in their spending. This also sits comfortably with the lowest consumer confidence fall on record in August. For example, in August, fuel prices decreased by 6.2 percent, but fuel sales decreased by 1.7 percent.
With CPI inflation still at an all-time high, it will continue to squeeze real incomes and weigh on consumer spending in the coming months. That said, the fiscal stimulus, which is likely to be higher than the government’s energy price guarantee, will provide significant support to households and consumer spending in the future.
We now expect the downturn to be smaller and shorter than before, which is one reason why we expect the Bank of England to raise interest rates to 4.0% (previously 3.0%) more than we expected. agreement 2.5%).
The World Bank has also warned that unless supply cuts and labor market pressures ease, global headline inflation is likely to remain at around 5% next year, excluding energy.
Central banks may need to raise interest rates by 2 percentage points to keep inflation down, he said. But an increase in that rate, combined with financial market stress, would reduce global GDP growth to 0.5% in 2023, or 0.4% per capita, which would meet the technical definition of a global recession.
Malpass urged policymakers to shift their focus from reducing consumption to increasing production, including efforts to generate more investment and productivity gains.
The bank said previous recessions show the dangers of allowing inflation to remain weak for too long.
World Bank Vice President Ayhan Kose said the recent tightening of monetary and fiscal policies would help curb inflation, but that this could exacerbate the global slowdown as it happens in many countries at the same time.
The report suggested that central banks could fight inflation without triggering a global recession by clearly communicating their policy decisions, and called for credible medium-term fiscal plans and more targeted relief for vulnerable households.
Good morning, and welcome to our rolling coverage of business, the global economy and financial markets.
Retail sales in Great Britain fell by 1.6% in August from July – much worse than expected.
Economists had expected a 0.5% decline. The sharp drop came after an upward revision of 0.4% in July.
The Office for National Statistics, figures revealed, all major sectors (food stores, non-food stores, online retail, and fuel) fell during the month; The last time this happened was in July 2021, when all legal Covid accommodation restrictions were lifted and people went to bars and restaurants.
Sales at supermarkets and other food outlets fell 0.8% in August, down 1.4% from pre-pandemic levels in February 2020. But alcohol and tobacco sales rose 6.3% as people sought relief from the cost of living. Crisis. Despite the fall in prices, sales of petrol and diesel fell by 1.7%.
Sales at department stores fell 2.7%, while furniture stores posted a 1.1% decline, mainly due to declines in furniture and lighting stores. A survey of retailers suggests that consumers are cutting back on spending due to price increases and affordability.
At clothing stores, sales volumes fell 0.6 percent in August and were 5.7 percent below their February 2020 level.
Online retail sales fell to 25.7% from 26.3% in July. But it was significantly higher than the pre-coronavirus levels, which was 19.8%.
The world appears headed for a global recession as central banks are forced to raise interest rates to combat high inflation, the World Bank has warned.
The world’s three biggest economies — the United States, China and the euro zone — are slowing at a faster pace and may even “slightly hurt the global economy next year, leading to a recession,” the bank said in a new study.
In the year The global economy is now in its fastest decline since the worst recession since the 1970s, and consumer confidence has already fallen sharply compared to previous global recessions.
World Bank President David Malpas expressed concern that these trends would continue, with detrimental consequences for emerging markets and developing economies:
Global growth is decelerating rapidly, with many countries falling into recession as it slows further.
10am BST: Eurozone inflation for August, final estimate (forecast: 9.1%).
10:00 BST: Italian inflation for August, final estimate (estimate: 8.4%).
3pm BST: US Michigan consumer sentiment for August.