Sterling weathers retail sales drop

In Ohio 16 members of an Amish community have been found guilty of "hate crimes". The offending Amish, who preach humility and passivity and normally reject such innovations as high school education and electricity, put aside their religious sensitivities for a series of attacks. Armed with electric shears they broke into the homes of a rival group at night and made a hideous mess of their hair. The ringleader of the perpetrators was a Mr Mullet. 

As the demon barber and his gang went down in Cleveland a different irony emerged in Euroland. A glittering cast celebrated the topping out of the European Central Bank's new headquarters building in Frankfurt, the cost of which is already €200m over budget. At the same time, Greek Prime Minister Antonis Samaras was failing to gain the approval of his coalition partner for the €11.5bn of cuts needed to release the next €31bn tranche of bailout money. He meets today in Rome with his companions in misery, the leaders of Ireland, Italy and Spain, presumably to hone their anti-austerity argument. 

Of more interest to investors on Thursday were the provisional purchasing managers' index (PMI) readings for the euro area, and they did not like what they saw. Germany's services sector was the best performer, still in the growth zone by a gnat's crotchet at 50.6. The second best achievement was by Germany's manufacturing sector at 47.3. The pan-Euroland readings for services and manufacturing were both four points into the red at 46.0. 

Shortly afterwards there was near-elation at a -0.2% monthly fall in UK retail sales. Although it was by no means a good figure it was better than many had feared, in view of the distraction of the Olympic games. The CBI's industrial trends survey, which quantifies the expectations of manufacturers, was also better than expected; 13 points higher on the month at -8. 

The one thing that did go well for the euro was Spain's auction of €4.8bn 10-year government bonds. The offer was oversubscribed and the Spanish treasury picked up its money at a rate of 5.67%. That is nearly a full percentage point less than Spain had to pay last time it went to the market and two percentage points below the peak two months ago. 

The news did little for the euro though. It gave up half a cent to the pound as it accompanied the yen and the US dollar lower. The antipodean dollars led the way, strengthening by half a cent or more against sterling. 

The US figures showed a provisionally positive PMI at an unchanged 51.5 and a five-point improvement in the Philadelphia Fed's manufacturing index at -1.9. Jobless claims were very close to the previous week. 

There is next to nothing on the ecostat agenda today apart from UK public sector net borrowing and Canadian inflation and wholesale sales. The Canadian inflation numbers are arguably the most important, in that the Bank of Canada is not bound by quantitative easing to perennially-low interest rates. A higher-than-expected print could send the Loonie north. Have a good weekend.