Last Friday saw the Prime Minister finally give into pressure and announce her resignation. Shortly after declaring that there would be a fourth vote on her deal, and a second referendum, it was pulled following a backlash from Tory backbenchers as well as cabinet ministers. With no way forward, Theresa May will resign on 7th June. The announcement signals the start of the Conservative leadership race, which will take place over the next several weeks. The front runner currently is former Foreign Secretary Boris Johnson, although strong contenders include Dominic Raab, Michael Gove and Andrea Leadsom. However, Conservative leadership races have always been hard to predict, and much can change as the prospective leaders set out their stalls in the coming days. A new leader may also call a general election to try and cement their position and increase their majority, although, as Theresa May experienced, this can be a risky strategy.
UK Inflation Rises
Data on UK inflation and retail sales were released last week. CPI Inflation accelerated in April to 2.1% from 1.9% in March driven primarily by a rise in transport costs, although the timing of Easter influenced this. Clothing and footwear continue to be a drag to headline inflation as retailers battle in a highly competitive market. However, retail sales figures showed that demand is beginning to improve with total spent and volume bought both increasing by over 5% compared to last year. Online sales, in particular, have driven growth, with 18.4% of all clothing and footwear purchases now being made online, growing 15.9% year on year.
Oil Price Slides
The oil price fell sharply last week as the market digested a sharp increase in crude and gasoline inventories in the US. Both gasoline and crude oil stocks increased by 4m barrels against an expected fall of 0.8m and 0.6m respectively, taking analysts by surprise. The increase in inventories suggests that demand has reduced, or supply has increased (or both) and is negative for oil prices. Nevertheless, the oil price has risen steadily so far this year, alongside other risk assets, and remains up over 25% year to date. At its current level, the price remains finely balanced with tensions in the Middle East creating the possibility of a supply shock, shale oil in the US providing plentiful supply and fears of slowing demand from the US-China trade war.
|UK 10 Year Gilt Yield||1.04||0.96||-0.08||-7.69%|