4 June 2019
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British high streets suffered their worst month in 24 years in May, with sales dropping by 2.7% compared to the same period last year. The decline, revealed overnight, is actually the biggest fall since the British Retail Consortium’s records began in 1995. Online stores were not immune to sluggish demand either; non-food internet sales grew by just 1.5%, another all-time low.
Britain’s manufacturing sector also had a poor May, during which it shrunk for the first time in nearly three years. The IHS Markit manufacturing purchasing managers’ index fell from 53.1 in April to 49.4 last month, putting it in contractionary territory. Part of the decline has been attributed to the fading effects of Brexit-related stockpiling.
European equities have broadly risen this week, making a partial recovery following the risk-off sentiment which affected global markets last week. The latest trade threat from China took aim at US imports of rare materials, which are key to the production of US technology goods. Meanwhile, Donald Trump threatened to raise tariffs on Mexican imports in response to what he views as unacceptable levels of illegal immigration. The S&P 500 slumped 2.6% last week.
The US President arrived in the UK on Monday. Having called the Mayor of London a “stone cold loser” just before landing, Trump was well-behaved during a visit to Buckingham Palace. Trump and Theresa May are set to have a tense conversation on the issue of Huawei, as May has indicated she will stand firm on the involvement of the Chinese company in the UK’s 5G network, despite America’s protests.
Trade concerns and the European parliamentary election results conspired to send developed market yields down last week. Fresh concerns over Italy’s growing deficit sent yields on German, Spanish and Italian sovereign bonds lower in particular. The US 10-Year Treasury yield declined to a 2019 low of 2.14%.
Finally, fears of a global economic slowdown and a higher-than-expected US crude inventories put pressure on oil prices. Brent crude oil has fallen over 15% since the beginning of May.
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