UK retail sales surprise on the upside

The volume of UK retail sales, including automotive fuels, remained flat month-on-month in February, with sales potentially dampened by unusually wet weather. The outturn was nonetheless better than had been expected, with consensus expectations for a 0.4% decline in sales volumes. There was also an upward revision to the January figure, which increased to 3.6% m/m from an initial print of 3.4%. Excluding automotive fuels, retail sales volumes rose 0.2% m/m in February. The strong January figure and the better-than-expected February data both point to tentative signs of a recovery in the UK economy in Q1, with real household incomes rising as inflation moves lower.

Germany’s IFO business climate index rose by significantly more than had been expected in March, increasing to 87.8 from 85.7. Consensus expectations had been for a March print of 86. The rise on the month was attributable to improvements in both the current assessment index, which rose to 88.1 from 86.9 in February; and the expectations index which rose to 87.5 in March from 84.4. While the broad-based improvements in sentiment across sectors is a step in the right direction, the headline index is still indicative of subdued conditions in the German economy.

Today’s Economic Data and Events

• No notable data releases.

Fixed Income

• US treasury yields fell on Friday, as markets weighed the possible timing of rate cuts, with both the 2yr and 10yr yields ending the week lower. The 2yr yield fell 5bps to 4.5891%, while the 10y yield had declined by 7bps to 4.1981% by end of day on Friday.
• Major European bond yields also declined across the board on Friday. ECB governing council member, Joachim Nagel, on Friday, highlighted that even once rate cuts start – with the first likely “before the summer break” – that markets should not expect cuts at every subsequent meeting. The 10yr Bund declined by 8bps to 2.322% and the 10yr Gilt yield fell 7bps to 3.9273%.

FX

• The dollar spot index ended the week by posting its biggest weekly gain since early January, rising 0.96%. There were declines in both EURUSD and GBPUSD on Friday, falling 0.48% and 0.45% to reach 1.0808 and 1.2601, respectively.
• The dollar was also stronger against commodity currencies on Friday. AUDUSD fell 0.84% to 0.6515, NZDUSD declined 0.86% to 0.5992 and USDCAD rose 0.54% to reach 1.3604.

Equities

• Moves in US equities were mixed on Friday, with the NASDAQ gaining 0.16% but the S&P 500 and Dow Jones falling 0.14% and 0.77%, respectively. Despite the S&P’s fall on the day, the index still nonetheless recorded its strongest weekly gain of 2024 thus far.
• European equity market moves were similarly mixed on Friday. The Euro Stoxx 50 fell 0.42%, and the CAC 40 declined 0.34%; while the FTSE 100 and the DAX gained 0.61% and 0.15%, respectively.
• Locally, the DFM was largely flat on Friday, while the ADX rose 0.53%.

Commodities

• Oil prices declined for the third day in a row on Friday. Brent fell 0.41% to USD 85.43/b but nonetheless remained 0.11% higher week-on-week. WTI declined 0.54% to USD 80.63/b.