Weekly Run Down

Good morning,?

Brits are becoming used to spending more and getting less for it and are adjusting their shopping habits accordingly. According to the British Retail Consortium, retail sales increased 5.2% in the year to April, which is about half the rate of inflation over the same period. The hospitality sector has shown tremendous resilience in the face of the challenges and expenditure in restaurants and bars increased by 4% last month - no doubt the Early May Bank Holiday and the bonus one we got yesterday will have got May’s numbers off to a strong start too.?

UK energy suppliers are being urged to renegotiate long term energy contracts with UK small businesses to help them avoid facing closure. The Federation for small businesses has called for action as thousands of UK businesses are stuck in multi year fixed energy contracts that were entered into when costs were spiraling in 2022. Since then, wholesale gas prices have fallen by 80% and the government has also withdrawn its support packages – meaning companies are stuck paying more, without support whilst the open market is much better value. Suppliers offering fixed price contracts will almost certainly have gone and hedged their own exposure in the market, meaning that they might be reluctant to renegotiate for fear of facing losses themselves. The FT has the story: https://www.ft.com/content/621f4906-18d2-408c-9fdf-b667547be254?

Across the Pond: the debt ceiling debate is once again dominating the news cycle, with Janet Yellen calling it a potential “economic catastrophe”. We don’t disagree with her at all, but the bipartisan game of chicken has been played so many times over the last decade or more that we’re fully expecting this to be ‘amicably’ resolved with a couple of concessions here and there – though both parties are miles apart on what they want in exchange for signing off an increase in the credit limit. Reuters is reporting that Ms Yellen has resorted to calling CEO’s directly and warning them of the “dangerous consequences of the current brinksmanship” probably in the hope that they in turn can pick up the phone and provide a ‘non-political’ intervention to their state legislators and try and get common sense to prevail. The debt ceiling is likely to be hit in the first week of June, so the countdown begins (again).?

The rescue of another failed bank in the US has prompted the G7 to think about a rapid response plan to future failings – or perceived failings that then in turn become a self-fulfilling prophecy. The plans would involve more focus on mid-sized banks, that have been benefactors of deregulation in recent years and would require them to hold more capital and more deposit insurance. The G7 finance ministers are meeting later this week in Japan, ahead of the main G7 meeting which takes place next week. Nikkei has the story: https://asia.nikkei.com/Spotlight/G-7-in-Japan/G-7-eyes-responses-for-rapid-Silicon-Valley-Bank-type-failures?

Looking ahead; the week’s data calendar isn’t too action packed, with the highlights being US inflation on Wednesday, US jobless claims on Thursday and UK GDP from Q1 on Friday. US payrolls numbers that came out on Friday beat expectations by a reasonable margin and have poured a bit of fuel into the debate as to whether the Federal Reserve can indeed pause their rate rise cycle and ‘wait it out’ if the economy is continuing to grow, as such we’d expect both inflation and jobless numbers to be hot topics of conversation amongst investors.? ?

Have a great week.?