Mixed signals for the UK consumer as the S&P 500 reaches a new high

Matt Britzman, senior equity analyst, Hargreaves Lansdown: “The FTSE 100 is set to open lower this morning as consumer data paints a mixed picture. UK consumer confidence is down, reversing months of gradual improvement, despite wages now outpacing inflation and interest rates on a path lower. Words matter, and the new government’s persistent downbeat tone around the economy and the upcoming budget could become a self-fulfilling prophecy.

Retail sales data hopefully provides some comfort, with August volumes up 1.0% against a consensus rise of 0.4% and an upward revision of July’s figures. The raw data suggests consumers are doing fine, but as we approach a key time for the retail sector and with confidence falling, spending could be held back by a lack of confidence rather than actual affordability.

The S&P 500 closed yesterday’s session at an all-time high, led by the tech and chip sectors, which have been the bellringers for the risk-on trade. Futures markets suggest momentum will continue this afternoon as investors regain confidence that the mythical soft landing might be a reality. Outside the usual cohort, homebuilders also had a good day as investors bet that the rate-cutting cycle will help push the US housing market back into action.

Brent oil futures gained some traction and are trading around $74.7 per barrel, just about the highest level in over two weeks. Rising tensions in the Middle East and hope that the US rate-cutting cycle will help stimulate demand are both providing a positive tailwind. But traders will have the looming supply increase from OPEC+ in the back of their minds.”