Early Morning Call: UK retail sales data beats expectations, but remains below inflation

Equity market overview

Equity markets marked a pause in the Asia-Pacific region overnight, following a mixed session in the US.

Japan’s Nikkei rose as it reopened after a holiday yesterday while indices in Hong Kong and Australia showed losses. In Japan, Tokyo's core CPI, a leading indicator of nationwide trends, rose at a faster-than-expected 4% in December year-on-year (YoY), exceeding the central bank's 2% target for a seventh straight month.

European indices are trading lower this morning, after hitting new highs earlier this week. The FTSE 100 rose to 7,726 towards the end of Monday’s session, a level not seen since early August 2018.

The BRC retail sales monitor increased by 6.5% in December YoY, following a 4.1% rise the previous month. This was an acceleration of the growth that still lags inflation which stood at 10.7% in November, representing a sizeable fall in real-terms expenditure. A separate survey from Barclays revealed that spending on its credit and debit cards rose 4.4% in December YoY, a long way behind consumer price inflation.

In France, industrial production rose more than expected, by 2% in December month-on-month (MoM), after a 2.5% drop the previous month. Economists had expected a 0.8% increase.

In the US this afternoon, wholesale inventories are forecast to rise by 1% in November MoM, after a 0.5% increase in October. Dollar weakness continues ahead of US consumer inflation data to be released on Thursday. The dollar index fell below 103 for the first time since mid-June last year.

EUR/USD climbed to a new seven-month high, the Australian dollar climbed to a five-month high against the greenback. Dollar weakness also provides support to gold, which briefly traded above $1,880 yesterday, a level not reached since 9 May 2022.

Earnings

Elsewhere on the equity markets, AO World raised its profit guidance for the year to March 2023. The group now expects adjusted EBITDA to be in the range of £30 million to £40m. Revenue continues to be in line with the board’s expectations.

In the US, Bed Bath & Beyond is scheduled to report before the market open. Analysts anticipate a loss of $2.38 per share on revenue of $1.33 billion.

Last week, the group said it was considering strategic alternatives, including a debt restructuring, raising new debt or equity, selling assets and "obtaining relief under the US bankruptcy code".

According to Bloomberg news, Apple plans to use an in-house designed chip from 2025, and therefore will drop a Broadcom chip it has been using. According to the report, Apple also swapped out Qualcomm for homegrown modems.