Retail sales dropped 0.9% in June.
Friday morning, the Department of Commerce released its closely watched report on retail sales in the month of June, showing that sales saw a notable decline during the month after surging higher in the previous month. The report showed that retail sales fell 0.9 percent in June following an upwardly revised 1.5 percent increase in May. Economists had been expecting sales to come in unchanged compared to the 1.4 percent increase originally reported for the previous month. The drop in retail sales, which marked the biggest decline since August of 2005, was partly due to a notable decrease in sales by motor vehicle and parts dealers, which fell 2.9 percent in June after rising 1.1 percent in May.

Excluding the decrease in auto sales, retail sales fell by a more modest 0.4 percent compared to a 1.6 percent increase in the previous month. The decrease still came as a surprise to economists, who had expected ex-auto sales to edge up 0.2 percent. Notable decreases in sales by furniture and home furnishings stores and building material and garden supplies dealers also contributed to the drop in retail sales. Additionally, the report showed that sales by gas stations fell 1.1 percent in June after surging up 4.1 percent in May. Gas station sales have been trending higher recently amid higher gas prices. With the decrease in sales in June, the annual rate of retail sales growth slowed to 3.8 percent from 5.0 percent in the previous month.


9:30AM London is higher by mid-day Friday as financial stocks surge.

By mid-day in London, the FTSE 100 was up 17 points, or 0.3%, to 6,714.9.

Financials made gains as the US credit market showed signs of estabilising. Hedge fund group Man is soaring after the upbeat trading statement yesterday with little impact from the sub-prime problems in the US. Quintain Estates & Development also surged after bid interest from HBOS, while miners retreated after recent gains.

Advancers of the Day

Man Group is up 2 per cent after strong first-quarter trading update released on Thursday and healthy full-year outlook. Other financials were also higher as Standard Chartered was up 2 per cent and Alliance & Leicester added 2.1 per cent, while Prudential rose 1.9 per cent.

Barclays advanced 0.7 per cent after a Dutch court cleared the sale of LaSalle Bank of ABN Amro, its US banking operation, to Bank of America.

Quintain Estates & Development put on 4.4 per cent after HBOS agreed to acquire a 12 per cent stake in the property developer.

Decliners of the Day

Rio Tinto retreated from gains and declined 0.3 per cent after Alcoa last night withdrew its offer for Alcan, paving the way for Rio to agree a $44bn deal.

Other mining stocks also declined following their recent rally. BHP Billiton dipped 0.5 per cent, Lonmin was down 0.6 per cent, while Antofagasta shed 1.1 per cent.

Away from the benchmark index, FTSE 100, Magners cider group C&C plummeted after it cut its full year profit targets, citing weaker than expected growth in cider sales in the UK. The company tumbled 16.3%.


9:00AM Higher import prices, weak retail sales weighed on pre-market moods.

U.S. stock futures pointed modestly higher Friday, as data which showed a sharper-than-expected drop in retail sales and higher import prices offset gains in the shares of General Electric (GE: chart). The Dow member posted earnings in line with expectations and said it plans to exit the U.S. subprime mortgage business. It also raised its 2007 share-buyback program to $14 billion.

On the economic news front, June retail sales fell 0.9%, the largest decline since August 2005. Import prices rose 1% in June on a 4.7% gain in the price of imported petroleum.

Other companies in focus included Bank of America (BAC: chart) after a Dutch court ruled that ABN Amro (ABN: chart) can proceed with the sale of its LaSalle division to the U.S. banking giant. Aluminum giant Alcoa (AA: chart) withdrew its bid for Alcan (AL: chart) after Rio Tinto offered a higher bid yesterday.

In other corporate news, Amgen (AMGN: chart) said its board of directors authorized an additional share buyback of up to $5 billion. S&P 500 futures rose 0.50 points at 1,556.20, while Nasdaq 100 futures rose 1.50 points at 2,036.25. Dow industrials futures added 10 point.