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Pre-market briefing: UK retail sales rose more-than-expected in May

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UK Market Snapshot 

UK markets finished lower yesterday, after the US Federal Reserve indicated that it might start tapering its monetary easing policy by the end of this year and following downbeat Chinese manufacturing PMI data. Miners, Polymetal International, Fresnillo and Randgold Resources plunged 12.0%, 8.1% and 7.5%, respectively, tracking losses in metal prices. Aberdeen Asset Management tumbled 7.9%, following a broker downgrade to ‘Neutral’ from ‘Buy’. Banks, Royal Bank of Scotland Group and Barclays retreated 5.0% and 4.4%, respectively, after the Bank of England identified a short fall of capital worth £27.1 billion in top 5 UK banks. On the flipside, Ted Baker surged 15.7%, after reporting almost 30% rise in its first quarter retail sales. The FTSE 100 shed 3.0%, to close at 6,159.5, while the FTSE 250 slid 2.4%, to settle at 13,667.4. 

US Market Snapshot 

US markets closed lower yesterday, as concerns that the US Fed might taper its quantitative easing policy continued to dampen investment sentiment. Walt Disney dropped 3.7%, after a broker downgraded the stock to ‘Neutral’ from ‘Conviction Buy’. Ebix plunged 44.2%, after the Goldman Sachs Group terminated an agreement to acquire the company after it was investigated by federal prosecutors. Newmont Mining tumbled 6.7%, tracking losses in gold prices. Facebook shed 1.7%, after the company launched video recording and sharing feature for Instagram. Bucking the trend, GameStop rallied 6.3%, after Microsoft stated that it would waive some of its policies for its new Xbox One console. The DJIA shed 2.3%, to settle at 14,758.3, while the NASDAQ slid 2.3%, to close at 3,364.6. The S&P 500 slipped 2.5%, to settle at 1,588.2. 

Europe Market Snapshot 

Other European markets finished lower yesterday, after the US Fed indicated that it might alter the pace of its monetary easing policy by the end of 2013 and following dismal Chinese manufacturing data. Compagnie Financiere Richemont tumbled 5.2%, after a report indicated that Swiss watch exports declined in May. Allianz dropped 4.8%, after AIR Worldwide, provider of risk modelling services indicated that the recent floods in Germany might cost up to $7.7 billion to insurers. Carmakers, Bayerische Motoren Werke, Daimler and Volkswagen retreated 4.8%, 4.6% and 4.1%, respectively. Commerzbank fell 1.6%, amid news that the company would cut as much as 5200 jobs by 2016. The FTSEurofirst 300 index declined 3.1%, to close at 1,144.0. Among other European markets, the German DAX Xetra 30 slid 3.3%, to close at 7,928.5, while the French CAC-40 shed 3.7%, to settle at 3,698.9. 

Asia Market Snapshot 

Markets in Asia are trading lower this morning, extending their decline, amid worries that the Federal Reserve might wind up its bond buying program later this year. In Japan, Kubota Corp. is trading 5.0% lower, after a broker slashed its price target on the stock. Mitsubishi UFJ Financial Group is trading 2.6% lower, after the company agreed to settle claims on grounds of transferring money to countries with sanctions. In Hong Kong, Galaxy Entertainment Group is trading 5.9% lower, after a broker downgraded the stock. Jiangxi Copper is trading 0.6% lower, tracking losses in copper prices. In South Korea, POSCO and Korea Zinc are trading 3.4% and 3.2% lower, respectively. The Nikkei 225 index is trading 0.9% lower, at 12,901.3. Hang Seng index is trading 1.5% down, at 20,079.2, while the Kospi index is trading 1.9% lower, at 1,815.7. 

Key Economic News 

UK mortgage lending rose in May, indicates CML 

The Council of Mortgage Lenders (CML) reported that, the total gross mortgage lending in the UK property market increased by 21.0% sequentially to £14.7 billion in May, marking its highest monthly estimate since October 2008. On an annual basis, total mortgage lending advanced 17.0% in May. 

UK retail sales rose more-than-expected in May 

The Office for National statistics (ONS) reported that, on a monthly basis, retail sales (including fuel) in the UK rose 2.1% in May, marking its fastest rate of growth since February and compared to an upwardly revised fall of 1.1% recorded in the previous month. Market had expected the retail sales to rise 0.8% MoM in May. Meanwhile, on a monthly basis, retail sales excluding fuel rose 2.1% in May, from an upwardly revised 1.2% decline recorded in the previous month. Market had expected the retail sales to rise 1.0% MoM in May. On an annual basis, retail sales (including fuel) rose 1.9% in May, following an upwardly revised 0.8% rise reported in April. On a yearly basis, retail sales excluding fuel advanced 2.1% in May, following a revised 0.6% rise recorded in the previous month. 

UK industrial orders rose less-than-expected in June, indicates CBI 

The Confederation of British Industry (CBI), in its latest industrial trends survey reported that, the total order book balance in the UK rose to a reading of -18.0 in June, compared to a level of -20.0 in May. Market had expected the index to improve to a reading of -12.0 in June. Meanwhile, trend selling prices fell to a level of 3.0 in June, from a level of 4.0 recorded in the previous month. 

German producer prices declined more-than-expected in May 

On a month-on-month basis, the Producer Price Index (PPI) in Germany edged down 0.3% in May, following a 0.2% fall reported in April. Market had expected the index to fall 0.1% MoM in May. Meanwhile, on an annual basis the PPI rose 0.2% in May, following a 0.1% gain recorded in the previous month. 

German manufacturing activity deteriorated unexpectedly in June, indicates Markit/BME 

Markit/BME reported that, on a seasonally adjusted basis, the preliminary Purchasing Managers' Index (PMI) for manufacturing in Germany slipped to a reading of 48.7 in June, marking its lowest level in two months and compared to a reading of 49.4 recorded in May. Market had expected the index to rise to a reading of 49.9 in June. However, the preliminary services PMI rose to a reading of 51.3 in June, marking its highest level in four months and compared to a reading of 49.7 in May. Market had expected the index to rise to a reading of 50.0 in June. Meanwhile, the flash Composite Output Index edged up to a reading of 50.9 in June, from a reading of 50.2 in May. 

French manufacturing activity rose to a 16-month high in June 

On a seasonally adjusted basis, the preliminary manufacturing activity in France rose to a reading of 48.3 in June, marking its highest level in 16-months and compared to a reading of 46.4 recorded in May. Market had expected the index to rise to a reading of 47.0 in June. Meanwhile, the preliminary services PMI climbed to a reading of 46.5 in June, marking its highest reading in ten months higher than a reading of 44.3 recorded in May and better than the expectations of the index to rise to a reading of 44.8 in June. The Composite Output Index that measures performance of both manufacturing and service sectors, rose to a reading of 46.8 in June, marking its highest reading in ten months and compared to a reading of 44.6 reported in May. 

Euro-zone manufacturing activity improved to a 16-month high in June, indicates Markit 

Markit Economics reported that, on a seasonally adjusted basis, the preliminary manufacturing PMI in the Euro-zone rose to reading of 48.7 in June, marking its highest level in 16-month and from a reading of 48.3 in May. Market had expected the index to rise to a reading of 48.6 in June. Meanwhile, the preliminary services PMI rose to a reading of 48.6 in June, marking its highest level in 15-months and compared to a reading of 47.2 in May. Market had expected the index to rise to a reading of 47.5 in June. Also, the preliminary composite PMI improved to a reading of 48.9 in June, from a reading of 47.7 in May. Market had forecasted the index to rise to a reading of 48.1 in June. 

Euro-zone consumer confidence improved for seventh consecutive month in June 

According to preliminary estimates, Consumer Confidence Index in the Euro-zone improved to a reading of -18.8 in June, marking its seventh consecutive monthly increase and compared to a reading of -21.9 recorded in the previous month. Market had expected the index to rise to a reading of -21.5 in June. 

SNB left its key interest rate unchanged 

The Swiss National Bank (SNB) left its target range for the three-month Libor rate unchanged at 0.0%-0.25% and maintained its minimum exchange rate at CHF 1.20/€. The bank maintained its view that the Swiss franc remained high. It further stated, “An appreciation of the Swiss franc would compromise price stability and would have serious consequences for the Swiss economy.” 

Switzerland's trade surplus widened less-than-expected in May 

International trade balance in Switzerland widened to a surplus of CHF2.22 billion in May, from a downwardly revised CHF1.70 billion surplus recorded in the previous month. Market had expected a surplus of CHF2.40 billion in May. Meanwhile, exports rose to CHF17.43 billion in May, from a revised figure of CHF17.07 billion reported in April, while imports fell to CHF15.21 billion in May, from a revised figure of CHF15.38 billion recorded in April. 

US jobless claims rose more-than-expected last week  

For the week ended 15 June 2013, initial jobless claims in the US climbed to 354,000, compared to the previous week's revised figure of 336,000. Market was expecting the claims to edge up to 340,000, from 334,000 originally reported for the previous week. Additionally, for the week ended 08 June 2013, continuing claims in the US fell to 2.951 million, compared to the preceding week's revised level of 2.991 million. 

US manufacturing activity declined in June, indicates Markit 

Markit Economics reported that, the preliminary manufacturing PMI in the US declined slightly to a reading of 52.2 in June compared to a reading of 52.3 recorded in the previous month. Market had expected the index to rise to a reading of 52.5 in June. 

US Leading Economic Index rose slightly less-than-expected in May, indicates CB 

The Conference Board (CB) reported that the Leading Economic Index in the US rose 0.1% in May, following an upwardly revised 0.8% gain recorded in the previous month.  Market had expected to index to increase 0.2% in May, following a 0.6% growth originally reported for the previous month. 

US existing home sales rose more-than-expected in May 

The National Association of Realtors (NAR) reported that, on a seasonally adjusted monthly basis, existing home sales in the US rose 4.2% to an annual rate of 5.18 million in May, marking its highest annual rate since November 2009 and following a 0.6% rise to 4.97 million annualised rate in April. Market had expected the existing home sales to rise to 5.00 million in June. 

US Philadelphia area manufacturing activity grew more-than-expected in June 

The Federal Reserve Bank of Philadelphia reported that, the diffusion index of current activity edged up to a level of 12.5 in June, marking its highest level since April 2011 and from a level of -5.2 recorded in the previous month. Market had expected the index to improve to a level of -2.0 in June. 

Japan Leading Economic Index rose less-than- initially estimated in April 

The Leading Economic Index in Japan rose to a reading of 99.0 in April, from a revised reading of 97.7 in March. Market had initially estimated the index to increase to a reading of 99.3 in April. Meanwhile, the Coincident Economic Index, which measures the current economic situation, edged up to a reading of 95.3 in April, from a reading of 94.6 recorded in the previous month and also higher than the flash estimate of 94.8. The Lagging Index, a measure of the past performance of the economy, dropped to a reading of 87.9 in April, from a reading of 88.0 recorded in March, but slightly higher than 86.8 estimated earlier.


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