Early Morning Call: FTSE 100 opens higher as BRC retail sales rise more than expected

Equity market overview

Equity markets were mixed in the Asia-Pacific region overnight. Australia’s S&P/ASX 200 rose 1.26% as Westpac consumer confidence rose 9.4% month-over-month (MoM) in April to its highest level since June 2022, boosted by the Reserve Bank of Australia's (RBA) pause in rate hikes. Economic conditions in the next 12 months rose 16.5%.

The NAB business confidence also rose to -1 in March, from -4 the previous month. Economists expected an improvement to -2 on average. But NAB Chief Economist, Alan Oster warned that "confidence was particularly poor in retail and wholesale, likely reflecting that firms are concerned about how much longer consumer spending will hold up."

China indices traded lower, underperforming the region. The country’s consumer price index (CPI) eased to a 0.7% growth in March year-on-year (YoY). It is the lowest reading since September 2021. China producer price index fell for a sixth straight month in March year-on-year, by 2.5%, faster than a 1.4% fall in February and matching market forecasts, led by a decline in production and raw material prices.

In Europe, equity market start the week higher. In the UK, the BRC retail sales monitor rose 4.9% in March compared to a year ago, maintaining the pace of the previous month, and above market expectations of a 4.2% gain. Another consumption indicator, the Barclays card spending, showed that credit and debit card transactions went up 4% year-on-year in March, slowing from a 5.9% jump in February.

At 10am this morning, retail sales in the eurozone are forecast to fall by 0.8% in February month-on-month, which means that the year-on-year decline is expected to steepen to 3.5%, after a 2.3% fall the previous month.

USD

The dollar hardly reacted last Friday at the release of non-farm payrolls (NFPs) as the number of jobs created came in broadly in line with consensus, at 236,000, falling from 326,000 in February.

The greenback rose on Monday though, as traders expect Federal Reserve (Fed) rates to rise next month. Fed fund futures show a 74% chance of a 25-basis point hike on May 3.

Bitcoin rallied alongside the dollar on Monday and now trades above $30k, a first since June last year. Coinbase, an all-session stock on IG platform, gained nearly 9% during Monday’s session.

Central banks

On Wednesday the market will be particularly attentive to the release of US CPI data for March, and to two central bank events.

The first one, at 3pm, will be the conclusion of the Bank of Canada (BoC) meeting. Economists anticipate a status quo. The overnight rate should remain at 4.5%, like it has been since January. At its last meeting in March, the BoC stated that it should continue to hold rates at the current level should economic conditions develop broadly in line with expectations.

The bank of Canada was the first of major economies to pause its tightening cycle.

And later, on Wednesday at 7pm, Federal Open Market Committee (FOMC) minutes will be released.