What’s happening: The British pound fell against the US dollar on Friday, as investors assessed UK’s retail sales data.
What happened: Data released on Friday showed UK retail sales unexpectedly contracted in December, adding to concerns over a stagnating economy.
Strength in the US dollar also exerted pressure on the GBP/USD forex pair.
Why it matters: Concerns over UK’s fiscal outlook have been weighing on the sterling this year. The British pound, which was the top performing G10 currency versus the US dollar last year, has declined by around 2.7% year to date.
The Office for National Statistics said on Friday that retail sales declined by 0.3% in December, following 0.1% growth in November. Analysts had projected UK’s retail sales to grow by 0.4% during the all-important holiday season.
Investors now widely expect the Bank of England to cut interest rates by around 66 basis points this year, while the US Federal Reserve is expected to slow their pace of rate cuts.
The UK’s economy expanded slower than expected in November, according to data released on Thursday. The British economy grew by 0.1% in November. While this marked a rebound from the 0.1% decline recorded in October, the figure came in lower than market estimates of 0.2% growth.
UK’s industrial production declined by 0.4% in November, compared to market expectations of a 0.1% rise.
Meanwhile, upbeat economic forecasts for the US economy and prospects of President-elect Donald Trump’s policies resulting in inflationary pressures provided a boost to the US dollar versus other major rivals.
Strength in the US dollar also weighed on the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose about 0.4% to 109.41 on Friday.
The GBP/USD forex pair fell around 0.6% to 1.2167 on Friday, while the EUR/GBP gained around 0.3% to 0.8442. The sterling recovered slightly this morning gaining around 0.3% versus the US dollar.
London’s FTSE 100 Index rose 1.35% to close at 8,505.22 on Friday, while the domestically focused FTSE 250 rose 0.34% to settle at 20,597.42.
What to watch: Data on UK’s unemployment rate, average earnings and employment change will be released on Tuesday. The UK’s unemployment rate is expected to increase to 4.4% in the three months to October, from 4.3% in the earlier period. Average weekly earnings, including bonuses, are projected to rise by 5.6% year-over-year, compared to 5.2% in the three months to October.
Context: Shares of Schlumberger gained on Friday after the company reported better-than-expected quarterly results.
Details: The oilfield services giant reported strong quarterly earnings, while raising its quarterly dividend.
Revenues grew by 3% year-over-year to $9.28 billion, topping consensus estimates of $9.18 billion. Adjusted earnings climbed 7% to 92 cents per share, beating Wall Street expectations of 90 cents.
North America revenues surged 7% during the quarter. International revenues rose 3% year-over-year, while Latin America’s revenues fell 3%, following a decline in drilling activity in Mexico.
The company raised its quarterly cash dividend by 3% to 28.5 cents per share, from 27.5 cents per share. On December 20, the company had initiated accelerated share repurchase transactions worth $2.3 billion.
“With the anticipated completion of our announced acquisition of ChampionX, we are set to further strengthen our production and recovery capabilities, enabling us to deliver even greater value to our customers. This strategic acquisition will also enhance the resilience of the SLB portfolio, providing some stability against the cycles in the years to come,” CEO Olivier Le Peuch said.
How shares responded: Shares of Schlumberger jumped 6.1% to close at $43.58 on Friday, following the release of quarterly results. The stock had gained around 17% over the past month.
What to watch: Investors will continue monitoring the company’s acquisition of ChampionX, which is expected to provide a significant boost to its overall results ahead.
Other Markets: European indices closed higher on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 1.35%, 1.20%, 0.98% and 0.69%, respectively.
Russia reported that its military forces have made further advances in Ukraine’s eastern Donetsk region. The news sent the RUB/USD pair higher in forex trading this morning.
The People’s Bank of China held its key lending rates for the third straight month, in-line with market estimates, lending support to the CNY/USD forex pair.
Japan’s core machinery orders rose by 3.4% to ¥899.6 billion in November. The region’s machinery orders reaching a nine-month high sent the JPY/USD pair higher in forex trading this morning.
Colombia’s retail sales jumped by 10.4% year-over-year in November, following a 9% increase in the previous month. The region’s retail sales surging for the sixth straight month lent support to the COP/USD forex pair.
US housing stars climbed by 15.8% to an annualised rate of 1.499 million units in December, which sent the Dow Jones index higher by more than 300 points on Friday.
Italy’s construction output (1315 UAE Time), Eurozone’s construction output (1400 UAE Time), Russia’s balance of trade (1700 UAE Time) and current account (1700 UAE Time), Bank of Canada’s business outlook survey (1930 UAE Time), Russia’s PPI (2000 UAE Time), as well as Argentina’s balance of trade (2300 UAE Time).