FTSE 100 rises following UK retail sales release

Share prices in London outperformed as the market opened on Friday, after weaker-than-expected UK retail sales data appeared to fuel hopes of an interest rate cut.

The FTSE 100 index opened up 44.63 points, or 0.6%, at 7,503.72. The FTSE 250 was up 51.49 points, 0.3%, at 18,999.53, and the AIM All-Share was down 1.73 points, 0.2%, at 739.28.

The Cboe UK 100 was up 0.6% at 749.95, the Cboe UK 250 was up 0.2% at 16,432.05, and the Cboe Small Companies was up 0.6% at 14 973.16.

In Europe, the CAC 40 in Paris was up 0.5%, while the DAX 40 in Frankfurt was up 0.4%.

Locally, investors will be focusing on the latest UK retail sales data for December.

According to the Office for National Statistics, retail volumes saw their biggest monthly decline since January 2021, amid Covid-19 restrictions. This came as a shock to the market, which was expecting only a slight decline.

Retail sales fell 3.2% in December compared to November, well below market consensus. A monthly decline of 0.5% was forecast, according to FXStreet. In November, retail sales increased 1.4% compared to October.

“The question Bank of England policymakers will be asking is what this means for the economy and the inflationary environment. While problematic for retailers, the fall in demand could help the central bank in its mission to bring inflation back to 2% and, therefore, reduce interest rates sooner than it would currently allow,” said Craig Erlam, senior market analyst at OANDA.

Signs of a faltering domestic economy helped push shares in interest-rate-sensitive sectors higher as investors hoped the Bank of England would be quicker to start cutting rates.

Housebuilders Persimmon and Taylor Wimpey rose 2.0% and 1.0% respectively. However, Marks & Spencer fell 0.6%, while Next fell 0.2%.

Sterling was trading at $1.2670 early Friday, down from $1.27 earlier Friday, and $1.2687 at the close of London stock markets on Thursday.

Meanwhile, hopes of a March interest rate cut from the US Federal Reserve continue to fade.

According to the CME’s FedWatch tool, the market puts a 52% chance of a 25 basis point cut in March, and a 47% chance that rates will remain paused. A week ago, the tool indicated a 77% probability of a decline.

The euro traded at $1.0881, up from $1.0867.

In the FTSE 250, 4imprint rose 6.6%.

The promotional products marketing and distribution specialist said it has made “excellent progress” during 2023. Revenue is expected to be $1.33 billion, an increase by 16% year-on-year from $1.14 billion in 2022. Pre-tax profit is expected to be as much as $140 million, up from $104 million, and slightly higher than the top of the market consensus range.

The group also said it was “very well funded” for 2024, with liquidity and bank deposits of USD 105 million at the end of 2023, up from USD 87 million the previous year.

Meanwhile, among London small caps, Wincanton jumped 47% to 437.5p.

The Wiltshire, England-based logistics company said it had accepted the terms of a cash buyout offer recommended by CEVA Logistics, a subsidiary of French company CMA CGM.

The offer is worth 450 pence per share, valuing Wincanton at £566.9 million on a fully diluted basis, with an enterprise value of approximately £764.9 million. The offer price represents a 52% premium to Wincanton’s closing price of 297p on Thursday.

“The proposed acquisition of Wincanton represents an attractive growth opportunity which is part of Ceva’s expansion strategy. This is a unique opportunity to expand Ceva’s offering in the United Kingdom and to “gain complementary expertise in the grocery and consumer space,” the companies said.

At the same time, the rise in oil prices was caused by developments in the Middle East.

While Iran-backed rebels claimed they struck the commercial ship in the Gulf of Aden, the U.S. military later said the group’s missiles missed their target.

A barrel of Brent oil traded at USD 79.19, compared to USD 78.61.

In the United States, Wall Street finished higher, with the Dow Jones Industrial Average gaining 0.5%, the S&P 500 rising 0.9% and the tech-heavy Nasdaq Composite jumping 1.4%.

Apple jumped 3.3% after being upgraded by Bank of America, while better-than-expected results from Taiwan Semiconductor Manufacturing helped chipmakers advance.

In Asia on Friday, the Nikkei 225 index in Tokyo closed up 1.4%, benefiting from rising technology stocks and a weaker yen.

Japanese consumer inflation slowed again in December due to lower electricity and gas bills, government data showed, ahead of the Bank of Japan’s policy decision next week.

Prices in the world’s third-largest economy, excluding volatile fresh food, rose 2.3% year-on-year in December, compared with 2.5% the previous month. This figure is in line with market expectations and part of a general trend of slowing inflation over the past year, down from 4.2% recorded in January 2023.

Although inflation remains above the Bank of Japan’s long-standing two percent target, the Bank is expected to maintain its monetary easing measures on Tuesday.

Against the yen, the dollar was quoted at 148.31 yen, up from 148.11 yen.

In China, the Shanghai Composite closed down 0.5%, while the Hang Seng index in Hong Kong was down 0.7%. The S&P/ASX 200 index in Sydney closed up 1.0%.

Gold was trading at $2,027.64 an ounce early Friday, up from Thursday’s $2,015.55.

This article is originally published on zonebourse.com

Beth Malcolm

Beth Malcolm is Scottish based Journalist at Heriot-Watt University studying French and British Sign Language. She is originally from the north west of England but is living in Edinburgh to complete her studies.