Stocks in London opened in the green on Friday, after receiving a boost from a report that showed UK retail sales grew sizeably in January, a day after it was announced the nation fell into a recession last year.
The reading calmed some nerves about the health of the UK economy and supported shares in the retail sector.
NatWest sent lenders higher, meanwhile, though the stock itself had somewhat of a rollercoaster ride after the open. Underwhelming guidance sent the shares as much as 3.5% lower immediately after the opening bell. A buyback, chunkier dividend, profit beat and some chief executive clarity were reasons for investors to be cheerful, however, and the stock perked up.
The FTSE 100 index traded 54.06 points higher, 0.7%, at 7,651.62 in opening dealings.
The FTSE 250 was up 102.69 points, 0.5%, at 19,202.31, and the AIM All-Share was up 3.40 points, 0.5%, at 756.38.
The Cboe UK 100 was up 0.7% at 765.54, the Cboe UK 250 rose 0.6% to 16,613.58, and the Cboe Small Companies was down 0.1% at 14,554.72.
In Paris, the CAC 40 traded 0.6% higher in early trade. Frankfurt’s DAX 40 rose 0.5%.
UK retail sales growth comfortably topped forecasts in January, numbers showed, in an encouraging reading of an economy which fell into recession at the end of last year.
According to the Office for National Statistics, UK retail sales grew 3.4% on-month in January, a stark reversal in fortunes from the record 3.3% slide registered in December from November. December’s number was downwardly revised from a 3.2% fall.
January’s retail sales figure was predicted to show growth of 1.5%, according to FXStreet, so the actual figure markedly beat market consensus.
The latest figure showed the largest monthly rise since April 2021, taking retail sales volume back to the level of this past November.
Year-on-year, UK retail sales rose 0.7% in January, following a 2.4% fall in December. Annual growth defied expectations of a 1.4% decline, according to FXStreet.
The data follows numbers on Thursday showing the UK slipped into recession in the fourth-quarter.
UK gross domestic product slumped 0.3% in the fourth quarter of 2023 from the third quarter, according to figures from the ONS. This was worse than the expected 0.1% fall, according to FXStreet-cited consensus.
‘Retailers bagged the boost they were hoping for in January, after a disappointing December. The 3.4% monthly volume rise, coupled with a 3.9% value uplift was likely driven by heavy January sales activity. This uptick should be accepted cautiously, as we are likely to still experience a year of ups and downs,’ McKinsey & Co analyst Samantha Phillips commented.
Among those to trade higher on Friday morning in London, JD Sports rose 1.6% and Marks & Spencer climbed 1.2%.
The pound was quoted at $1.2583 early Friday, largely unchanged from $1.2581 late Thursday. The euro bought $1.0764, up slightly from $1.0759 at the time of the last European equities close. The dollar rose to JP¥150.23 against the yen, from JP¥150.11.
ING noted that progress the dollar made after a more robust than expected US inflation reading has faded, however.
‘Big chunks of the dollar rally induced by hotter inflation data have been unwound following a batch of soft activity figures yesterday. US retail sales fell more than expected in January, and the control group that excludes volatile items contracted 0.4% month-on-month versus an expected 0.2% increase. This is somewhat concerning: with lower credit availability and sticky inflation dampening purchasing power, spending growth will struggle to recover,’ ING analyst Francesco Pesole commented.
Focus turns to US producer price data at 1330 GMT. Numbers are expected show producer prices rose 0.1% monthly in January from December, according to FXStreet, but annual growth is forecast to ebb to 0.6% last month from 1.0% a month prior.
In Tokyo on Friday, the Nikkei 225 rose 0.9%, while the Hang Seng in Hong Kong jumped 2.5%. In Sydney, the S&P/ASX 200 added 0.7%. Financial markets in Shanghai reopen on Monday.
In New York, the Dow Jones Industrial Average shot up 0.9% on Thursday. The S&P 500 climbed 0.6% and the Nasdaq Composite rose 0.3%.
Back in London, NatWest shares traded 2.1% higher, recovering from an initial post-results stock price weakness on tepid guidance.
The lender also confirmed interim boss Paul Thwaite as permanent chief executive. Thwaite took on the job in an interim basis last year after Alison Rose resigned from the role in July. The scandal concerning the closure of the Brexit-backing politician Nigel Farage’s Coutts account culminated in Rose’s resignation at the time.
It reported consensus-beating annual results. Pretax profit in 2023 totalled £6.18 billion, a rise of 20% from £5.13 billion in 2022. It topped company-compiled consensus of £5.97 billion. Total income rose 12% to £14.75 billion from £13.16 billion, beating consensus of £14.61 billion.
NatWest achieved a bank net interest margin for the year of 3.04%, above its most recent guidance of ‘greater than 3%’. That outlook had been downgraded from a previous forecast of around 3.15%.
NatWest declared a final dividend of 11.5 pence, up 15% from 10.0p. Its total dividend for the year amounted to 17.0p, an increase of 26%. It also plans a £300 million share buyback programme this year.
Looking to 2024, it expects a return on tangible equity of around 12%, down from 2023’s 17.8%. It expects the figure to rise to ‘greater than 13% for 2026.
The RoTE outlook falls short of the 14%-16% it previously said it expected over the medium term.
Elsewhere among London-listed lenders, Barclays rose 1.9%. It reports annual earnings on Tuesday.
XP Power plunged 39% as it issued an early revenue warning for 2024. The manufacturer of power controllers, warned its 2024 outturn will be ’significantly below market expectations‘.
The Singapore-based firm said there will be a ’shortfall in revenue‘ this year.
‘This is based on recent order intake, revenue performance and discussions with customers, particularly within the Healthcare and Industrial Technology sectors, which confirm unusual, temporarily soft demand conditions and destocking. These softer trends have also emerged within our direct industry peers,’ it added.
‘In early 2024, we have seen, as expected, the continuation of the ongoing cyclical slowdown in the semiconductor manufacturing equipment sector and we continue to expect conditions in this sector to improve as the year progresses.’
XP Power said it has seen ‘additional savings’ that can be delivered in the first-quarter, however.
A barrel of Brent oil fetched $82.69 early Friday, up slightly from $82.66 late Thursday. Gold was quoted at $2,004.81 an ounce, up from $1,999.98.
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