UK Retail Sales Miss, As Markets Await Trump

European markets tread carefully ahead of controversial US president-elect’s inauguration. With his distinct lack of political prowess but seemingly clear vision for his time in office, we look set for a roller-coaster ride of political events. This coupled with mixed data from China which looks to bring a day of uncertainty and volatility ahead. With solid GDP figures but declines in Industrial production and fixed asset investment, it paints an uncertain picture.

Let’s not forget the ECB’s surprisingly dovish tone relayed to the market by Mario Draghi in light of the recent up-tick in inflationary pressures. We get the feeling he isn’t going to be jumping the gun anytime soon in terms of raising European interest rates, or tapering policy.

In the UK, Retail Sales figures for the month of December released at 09:30 came out with quite a sizeable miss. We were expecting a decrease of -0.1% but ended up sliding down to -1.9%. This has weighed on

Sterling which ultimately offsets its heroic gains over the past couple of trading sessions. This is the biggest monthly decline since December 2011. It seems to be the cherry on the cake which has been a whirlwind week of Theresa May speeches, CPI figures and pressures from our US peers all of which has seen moves of over 100 pips.

Royal Mail (LON:RMG) leads the way in decliners after yesterday’s disappointing figures this highlights the struggles many companies face with tech firms undercutting costs and efficiencies. With companies such as Amazon (NASDAQ:AMZN) offering a speedier service and impending drone drop offs.

Also down on the day is Tesco (LON:TSCO) who seemed to have spooked investors with their sluggish performance on international shores. They have pinpointed Poland as difficult international trading place with like-for-like growth of just 0.6%. Investors are also cautious of inflationary pressures which directly affect the performance of Tesco, not to mention their weaker purchasing power for importing goods due to a weaker Sterling.

BT is leading the way in terms of gainers in the UK, mainly due to HSBC among other equity researchers upping their price target for the shares. The firms also recently declared they are going to be paying a dividend on February 6th. Whitbread (LON:WTB) is also flying high due to upgrading broker recommendations with an 11% potential upside indicated by Goldman Sachs (NYSE:GS) among others. UK pubs and restaurants were on the receiving end of an upward drive in demand as Christmas festivities swept the nation.

The US dollar is edging higher again as investors anticipate President-elect Trump’s inauguration speech later today, while we could also get further hawkish comments from FOMC member Patrick Harker at 2pm (GMT).

Sterling and the Euro are currently slipping back along with the Japanese Yen.

We can certainly expect some measure of volatility if Mr Trump gives any further indications of the types of policies he intends to pursue in the coming weeks given the lack of detail that came out of his press conference last week.

We may see Gold and Silver come under pressure as well. Gold and Silver (more so Gold) have a direct inverse correlation with the USD and therefore could see either a break below the 1,200 level or a welcomed bounce higher which could see us head back into the 1,250 levels. Copper has also bounced off of its 258.00 support level which was previously seen as resistance back in late November/early December. This was caused by Chinese GDP showing a slightly better number than expected (the biggest consumer of the red metal).

Earnings

US quarterly earnings are light today with General Electric (NYSE:GE), SunTrust Bank and Citizens Financial Group being the most notable of companies.

The Dow Jones is expected to open 23 points higher at 19,755

The S&P500 is expected to open 7 points higher at 2,270

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