Share prices in London started lower on Friday, and the pound also lost ground, at the end of a week dominated by central bank actions, with a series of interest rate hikes despite a wobbly banking sector.
The FTSE 100 index opened down 64.95 points, or 0.9%, at 7,434.65. The FTSE 250 was down 145.61 points, or 0.8%, at 18,584.35, and the AIM All-Share was down 2.55 points, or 0.3%, at 804.89.
The Cboe UK 100 was down 0.8% at 744.26, the Cboe UK 250 was down 0.8% at 16,174.32, and the Cboe Small Companies was down 0.8% at 13,021.07.
The lower start for London equities came despite some positive UK economic data. UK retail sales continued to increase in February, pushing them back above pre-pandemic levels, figures from the Office for National Statistics showed.
Retail sales volumes are estimated to have increased 1.2% in February from the previous month, following a rise of 0.9% in January.
This came in far higher than market expectations, according to FXStreet. Markets had expected a 0.2% monthly rise in February.
February’s rise was the largest monthly increase since October, when retail sales volumes increased 1.4%. October’s figures were boosted by the additional bank holiday for the state funeral of Queen Elizabeth II.
The increase over the month to February returns sales volumes to February 2020 pre-pandemic levels, the ONS said.
Danni Hewson, head of financial analysis at AJ Bell, said: ‘Yes, sales are back to pre-Covid levels but that just shows an economy that’s stagnant. And compare how much people are paying for the privilege of buying the same amount of stuff they did three years ago and that’s up a staggering 16.6%.
‘People are hunting out bargains whether they’re found in the sales aisles being well stocked by department stores, or in charity shops or other second-hand emporiums. Purchasing power has been eroded and some retailer’s books clearly show the sector is paying a high price.’
Helen Dickinson, chief executive of the British Retail Consortium, agreed: ‘Rising inflation meant that sales volumes remained firmly in the red [on a year before]. Despite the ongoing cost of living squeeze, consumers were still ready to spend on what they needed, with higher sales for categories including clothing and cosmetics.’
Against the same month in 2022, retail sales volumes fell by 3.5% in February. Markets had expected retail sales volumes to fall 4.7% on an annual basis.
‘There remain challenges to consumer spending in the coming months with the end of the [UK government’s] energy bill support scheme in April and the increasing cost of borrowing,’ Dickinson said.
The pound was quoted at $1.2245 early on Friday in London, down from $1.2325 at the close on Thursday.
Sterling softened after a strong performance on Thursday following the Bank of England’s 11th successive interest rate hike, which took the benchmark bank rate to 4.25% from 4.00%.
Thursday’s move by the BoE followed similar interest rate decisions by the Swiss National Bank and Norges Bank on Thursday morning, the US Federal Reserve on Wednesday, and the European Central Bank last week.
The Fed raised US interest rates by a quarter of a percentage point, resisting the urge to pause hikes in the face of banking sector turmoil, while the SNB raised rates by a more aggressive 50 basis points. The ECB raised rates by the same amount last week. The Norwegian central bank opted for a 25 basis point hike.
In London, Smiths Group was the best blue-chip performer in early morning trade, rising 0.9% after the engineering firm said reported an improved performance in the first half of its financial year, with double-digit revenue growth and an increased dividend.
Pretax profit from continuing operations rose to £167 million in the six months ended January 31, from £160 million the previous year. Though total profit after tax fell sharply to £109 million from £1.12 billion.
Revenue from continuing operations increased 26% to £1.50 billion from £1.19 billion the year prior.
Chief Executive Paul Keel said, with the company’s order book healthy and trading strong, Smiths is raising its financial 2023 organic revenue growth guidance to ‘at least 8%, with moderate margin improvement.’
In the FTSE 250, JD Wetherspoon climbed 8.6% after it swung to pretax profit in the six months that ended January 29. The pub chain also noted that supply and delivery issues have ‘largely disappeared, for now’.
Wetherspoon reported profit before tax and separately disclosed items of £4.6 million, swinging from a loss of £26.1 million in the equivalent period the previous year. Pretax profit after separately disclosed items was £57.0 million, swinging from a loss of £13.0 million. Revenue climbed by 13% to £916.0 million from £807.4 million.
Chief Executive Tim Martin said that inflationary pressures on the pub industry have been ‘ferocious’, particularly in regard to energy, food, and labour. Nonetheless, he said, having experienced a ‘substantial improvement’ in sales and profits, the company is ‘cautiously optimistic’ about further progress in its current financial year.
TUI dropped 8.4% as it launched a €1.8 billion capital raise to repay German state aid it received at the start of the Covid pandemic.
The holiday operator said it will offer 328.9 million new shares at a subscription rate of 8 new shares for each 3 existing shares. The subscription price of €5.55 per new share represents a discount to the theoretical ex-rights price of around 40%, it noted.
Elsewhere in London, James Fisher & Sons lost 8.4% after it delayed the publication of its annual results by a month to April 28.
The marine services provider explained this was to allow it additional time to complete discussions with its lending banks regarding its debt facilities, as well as technical restrictions relating to its disposal of James Fisher Nuclear.
However, James Fisher said underlying operating profit from continuing operations in 2022 was broadly in line with 2021, while revenue from the same was £475 million, up 7.4% from £442.4 million.
In European equities on Friday, the CAC 40 index in Paris and the DAX 40 in Frankfurt were both 1.0% lower in early morning trade.
The euro stood at $1.0781 early Friday, lower against $1.0895 at the London equities close. Against the yen, the dollar was trading at JP¥130.04, lower compared to JP¥130.73.
In Tokyo on Friday, the Nikkei 225 index closed up 0.1%. The Shanghai Composite closed down 0.6%, while the Hang Seng index in Hong Kong closed down 0.7%. The S&P/ASX 200 in Sydney closed down 0.2%.
In the US on Thursday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.2%, the S&P 500 up 0.3%, and the Nasdaq Composite up 1.0%.
Brent oil was quoted at $74.97 a barrel at early in London on Friday, down from $76.59 late Thursday. Gold was quoted at $1,989.46 an ounce, lower against $1,992.82.
Still to come in Friday’s economic calendar, there are flash PMI readings for the eurozone, UK and the US at 0900 GMT, 0930 GMT and 1345 GMT, respectively.
Copyright 2023 Alliance News Ltd. All Rights Reserved.
