FTSE: Worse than Expected Retail Sales Send Stocks Lower

FTSE fall after weak retail sales

UK stocks continue to fall after losing 1.55% in the previous 2 sessions. Retails sales add to the woes of high interest rates for longer.

Retail sales data released this morning showed a drop of 2.7% YoY compared to last month’s increase of 0.4%. The market was expecting a decline in consumer activity, but consensus was at -0.2%.

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The large surprise in the decline of shoppers’ habits pushed the FTSE lower again in the early trading session. Despite the fact that often weak economic data has often sent stocks higher, since the market perceived greater chances of monetary policing easing.

But today’s figure for retail sales was greatly unexpected and so large a drop, at this point outweighing the positives from interest cuts. Later today we’re expecting Durable Goods Orders from the US.

This data is expected to show a decline of 0.8% MoM, compared to last month’s increase of 2.6%. I would expect that a low number would send stocks higher as it gives way to a more likely monetary easing from the Fed.

Technical View

The day chart below for the FTSE shows a correction underway within a major bullish trend. The correction comes after a new all-time high was posted on May 15. The RSI has been well above 70 for an extended period and broke below that level 2 candles back.

ftse drops on weaker than expected data

The break below signaled a possible correction, and that possibility seems to be playing out. Yesterday’s candle closed below the Fibonacci retracement support of 8309 (red line) and today’s candle should find support at the next Fibonacci support of 8202 (orange line).

The 8202 level also coincides with support from a previous high posted in April, which should make it harder to break. A close below that line should lead to further lows the following support at 8116 or 50% retracement level.

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Gino Bruno D'Alessio
Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.
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