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Retail Sales in U.S. Decline in August by More Than Forecast

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Consumer Prices

Sales at U.S. retailers dropped more than forecast in August, indicating a pause in recent consumer-spending strength that has carried the economy.

Purchases declined 0.3 percent from July, the first drop in five months, after a revised 0.1 percent advance in the previous month, Commerce Department figures showed Thursday in Washington. The median projection of economists surveyed by Bloomberg called for a 0.1 percent decline. Excluding cars, sales unexpectedly fell 0.1 percent.

An easing in vehicle buying matched a lackluster performance elsewhere, with sales falling in seven of 12 retail categories outside autos. While low borrowing costs, cheap gasoline prices and steady job gains should keep a floor under demand, wage growth remains slow and sustained weakness in consumer spending could limit any second-half economic rebound.

“This is not a good report, for the most part,” said Chris Christopher, director of consumer economics at IHS Global Insight in Lexington, Massachusetts. “The consumer’s doing relatively well — even with these numbers, it’s one of the strongest parts of the economy. There’s modest inflation, real disposable income gains are relatively robust, and they feel pretty confident.”

The report represents one of the last major data releases before Federal Reserve policy makers meet next week to debate raising interest rates. While officials are split on the urgency to increase borrowing costs, most investors and economists expect the central bank to hold off this month.

Jobless Claims

Other data releases on Thursday showed the number of applications for unemployment benefits barely rose last week, remaining close to a four-decade low. Wholesale prices in the U.S. were little changed in August.

Estimates of retail sales in the Bloomberg survey ranged from a decline of 0.8 percent to a 0.2 percent gain. July’s figure was revised from an initially reported reading of no change.

Core sales, the figures that are used to calculate gross domestic product and which exclude such categories as autos, gasoline stations and building materials, declined 0.1 percent last month. July’s reading was revised to a 0.1 percent decrease after an initially reported reading of no change.

Purchases at auto dealers dropped 0.9 percent and those at service stations fell 0.8 percent as fuel costs were slightly lower on average in August.

The auto figures are in line with industry data showing a slowdown. Sales of cars and light trucks eased to a 16.91 million annualized rate in August after 17.77 million in July that was the strongest in eight months, according to Ward’s Automotive Group figures.

Outside of autos, purchases fell 1.4 percent at building materials stores and dropped by the same percentage at sellers of sporting goods, books and music. Food and beverage store spending was up 0.3 percent and clothing gained 0.7 percent.

The decline in retail sales excluding autos follows a 0.4 percent decrease in July that was revised lower, according to Thursday’s report. They were projected to increase 0.2 percent, according to the Bloomberg survey median.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade long experience in the global financial market.

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Investment

Barclays Tell High Net Worth Investors to Shun Africa and Other Emerging Economies

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Barclays Bank

Barclays to High Net Worth Clients, Stay Off Africa and Other Emerging Economies

Barclays, one of the world’s largest investment banks, has started advising high net worth clients to stay off Africa and other emerging economies.

According to Barclays, despite the recent recovery noticed in emerging-market stocks, investors are better off avoiding the risks that still abound in emerging nations. Barclays Plc, however, advised high net worth clients to focus on U.S equities despite the S&P’s breakneck rally.

The investment bank said emerging economies do not have enough fiscal buffers to spend their way out of the COVID-19 pandemic and will likely continue to struggle in the near-time compared to the US with 12 percent of gross domestic product fiscal-support.

It said the huge US stimulus may halt rebound in emerging-markets stocks as more money is expected to flow into the world’s largest economy and its European counterparts.

“Compared to the U.S., emerging-market economies appear more vulnerable,” said Haider, the London-based managing director and head of global growth markets. “Their central banks have less room to maneuver, their governments may not be able to provide unlimited support and equity markets, given their sector mix, can be more challenged by an economic slowdown.”

Barclays added that even after 33 percent rebound in stocks of emerging markets since the panic selloff subsided in March, stocks are still down by 9 percent from year-to-date while the US S&P 500 stocks are up by 45 percent. Presently, their stocks trading at a 36 percent discount to US stocks, up from 25 percent three months ago.

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Economy

Crude Oil Rises to $43.1 Per Barrel on Production Cuts Extension

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  • Crude Oil Hits $43.1 Per Barrel Following OPEC’s Production Cuts Extension

Brent crude oil, against which Nigerian oil price is measured, rose by 1.25 percent on Monday during the Asian trading session following OPEC and allies’ agreement to extend crude oil cuts to the end of July.

OPEC and allies, known as OPEC plus, agreed to extend production cuts of 9.7 million barrels per day reached in April to July on Saturday.

In the virtual conference, delegates agreed that members, including Nigeria and Iraq presently struggling to attain a 100 percent compliance level must keep to the agreement or be forced to do so in subsequent months.

Nigeria, Iraq and others failed to keep to the cartel’s agreement in May after reports show that Nigeria only managed to attain a 19 percent compliance level during the month while Iraq struggled to attain just 38 percent in the same month.

Russia and Saudi Arabia, the two largest producers of the group, warned members to stick to the agreed quota if they want to rebalance the global oil market.

While the errant producers such as Iraq and Nigeria have vowed to reach 100% conformity and compensate for prior underperformance, we still think they will likely continue to have some commitment issues over the course of the summer,” said Helima Croft, head of global commodity strategy at RBC Capital Markets.

The potential return of Libyan output could also cause considerable challenges for the OPEC leadership.

Earlier on Monday, Brent crude oil hits $43.1 per barrel, more than a month record-high, before pulling back slightly to $42.83 per barrel.

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Economy

Gold Dips by 2 Percent on Better Than Expected Job Report

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  • Gold Dips by 2 Percent on Better Than Expected Job Report

Gold prices declined by 2 percent on Friday following a better than expected US non-farm payroll report.

The report showed an increase of 2.5 million payroll numbers against a decline of 7.5 million predicted by many experts.

The surprise number boosted investors’ confidence in US recovery as many dumped their haven investment (gold) for the stock market.

“We had significantly stronger-than-expected U.S. payroll numbers – an increase of 2.5 million versus an expectation of a decline of 7.5 million – that 10-million swing has brought forward expectations of the economic recovery in the United States,” said Bart Melek, head of commodity strategies at TD Securities.

Spot gold immediately declined by 1.9 percent per ounce to $1,678.81 while the U.S. gold futures slid 2.6 percent to settle at $1,683.

Gold was also being pressured by stronger yields and a slightly firmer dollar, “meaning the opportunity cost to hold gold in the portfolio has gone up,” Melek added.

The surprise didn’t stop there, US Dow Jones was up 614 points despite the protest going on the US and US-China tension.

Also, NASDAQ rose by 29 points while the S&P index added 50 points increase.

Note: Investors generally increase their investments in gold and other haven assets during a crisis to avert risk exposure and do the opposite once they sense a better economy.

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