Last month, the High Street was battered by heavy rain, resulting in a significant decline in retail sales. The Office for National Statistics reported a 1.2% drop in July, much worse than the anticipated 0.5% decrease. This decline coincided with the FTSE 100 index experiencing its third consecutive week of losses. Investors are feeling uneasy due to various global economic concerns, including rising interest rates and the slowdown of China’s property sector. Richard Hunter, Head of Markets at Interactive Investor, stated that the list of worries facing investors shows no signs of diminishing.
Despite a heatwave in Europe, the UK experienced its wettest July since 2009, causing a decline in demand for summer items such as bikinis and barbecues. As a result, online sales increased, reaching the highest level since February 2022. Supermarkets saw a 2.6% decrease in retail sales volumes, primarily attributed to a decline in clothing sales. ONS deputy director Heather Bovill explained that the poor weather and increased cost of living impacted sales in various sectors, especially supermarkets, department stores, and household goods.
The current situation does not bode well for investors as the FTSE 100 index continues to suffer losses. This trend is mirrored in markets across Europe, Asia, and Wall Street. Concerns over higher interest rates, a slowdown in China, and the possibility of a global recession are wreaking havoc on financial markets. Bond yields in the UK have reached a 15-year high, and in the US, they are at levels not seen in 16 years. There are warnings that inflation will remain high for longer than previously expected, leading to a projected interest rate of 6% by the end of the year. This predicament could create challenges for Rishi Sunak and the Conservatives if an autumn 2024 election is held.
German economy is also suffering from a recession, while the US economy continues to defy expectations despite higher borrowing costs. The US Federal Reserve has warned of potential inflation risks, suggesting that further rate hikes may be necessary. This has led to a decrease in investor bets on rate cuts in the coming year. The impact of these financial market disturbances has even affected cryptocurrencies, with bitcoin experiencing a 10% decline this week.
Next week, attention will be turned to the annual meeting of top central bankers in Wyoming, where investors will closely analyze a speech by Fed chairman Jerome Powell for insights into the future of interest rates. Overall, the current state of financial markets is causing concern, with the FTSE 100 demonstrating a lackluster performance akin to a sleepy teenager on a school day.
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