Stock prices in London traded solidly higher on Friday afternoon, supported by a robust UK retail sales reading, as well as a profit beat from lender NatWest.
NatWest shares stuttered off the starting block on Friday morning, but investors warmed to the numbers as the day wore on.
The FTSE 100 index jumped 79.17 points, 1.0%, at 7,676.70. The FTSE 250 was up 100.30 points, 0.5%, at 19,199.92, and the AIM All-Share was up 3.51 points, 0.5%, at 756.49.
The Cboe UK 100 was up 1.1% at 768.03, the Cboe UK 250 was up 0.5% at 16,596.98, while the Cboe Small Companies was down 0.2% at 14,547.04.
In European equities, the CAC 40 in Paris was up 0.6%, while the DAX 40 in Frankfurt was up 0.8%.
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 traditional ’golden quarter’ seems to have been reconfigured as those big American discounting moments become embedded in the UK retail landscape. The shift has undoubtedly been helped along by the cost-of-living crisis which stretched consumer budgets to the limit and made all of us hyper aware of where every single penny was being spent,’ said AJ Bell analyst Danni Hewson.
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.
Hewson continued: ‘Supermarkets, with their economies of scale, enjoyed the biggest boost in January, with consumers hunting out value wherever they can find it...People are still paying more for less and they’re growing ever more weary of it. With the country officially in recession confidence is likely to be knocked further, even as people’s pay packets finally feel a little thicker.’
Among those to trade higher on Friday morning in London, FTSE 100 stocks JD Sports and Marks & Spencer climbed 2.0% each.
The pound was quoted at $1.2596 on Friday at midday, up from $1.2581 late Thursday. The euro bought $1.0777, up from $1.0759 at the time of the last European equities close. The dollar rose to JP¥150.15 against the yen, from JP¥150.11.
Focus turns to US producer price data at 1330 GMT. Numbers are expected to 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.
‘The producer price inflation is expected to have slowed in January. And if it didn’t, it doesn’t matter,’ said Swissquote Bank analyst Ipek Ozkardeskaya.
‘We are coming to a point where the economic data becomes meaningless. Whatever the data prints, the US stock markets find a positive narrative to keep the rally going. It’s, of course, blind optimism; investors are blinded by the brilliance of the rate cuts at the tunnel’s end.’
Stocks in New York were called mostly higher. The Dow Jones Industrial Average was called down 0.1%, but the S&P 500 index up 0.2%, and the Nasdaq Composite 0.6% higher.
NatWest was the best performing FTSE 100 stock, rising 5.8% as it recovered from an initial post-results stock price weakness which sprung from 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.
NatWest shares gain on stronger fourth-quarter earnings after rocky start
Pretax profit in 2023 totalled £6.18 billion, a rise of 20% from £5.13 billion in 2022 and topping 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.
Barclays rose 2.4%, before reporting annual earnings on Tuesday next week.
In the FTSE 250, City of London Investment rose 3.1%, after it reported generally strong half-year results with increased net asset value, and announced its intention to delist in New Zealand.
Net asset value at December 31 was 401.7 pence per share, up from 385.2p at June 30, while NAV total return for the six months to December 31 was positive 6.5%. This outperformed its benchmark, the FTSE All-Share Index, which delivered a positive 5.2% return ‘with medium-sized and small companies slightly outperforming larger peers’.
City of London Investment also said the costs of maintaining its secondary listing on the New Zealand Stock Exchange ‘have become disproportionate to the benefits’, especially since shareholdings in Wellington now only represent 1.2% of its issued stock.
Consequently, the trust will be delisting its shares from the NZX Main Board with effect from March 21; they will be automatically transferred to the UK register.
Among London’s small-caps, XP Power plunged 38%, after 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,’ XP Power said.
On AIM in London, Plexus surged 18%, after it won a deal worth £1 million to provide services for multiple plug and abandonment activities in the North Sea.
The Aberdeen-based oil and gas engineering services business said it will provide a customer with wellhead equipment in the ‘Dutch sector of the North Sea’.
Plexus said work begins in the second quarter of the year and runs for nine months, while work in the plug and abandonment space could pick up.
‘The number of wells that must be permanently plugged and abandoned is fast growing, particularly in mature offshore locations such as the North Sea, where the OEUK indicated that decommissioning would account for 25% of oil and gas expenditure in 2023, up from 12% in 2022, and encouragingly I believe this trend will continue. We are therefore delighted that Plexus’ reputation is strengthening within this sector, and that our range of customers is broadening,’ said Plexus Chief Executive Officer Ben Van Bilderbeek.
A barrel of Brent oil fetched $81.99 on Friday at midday, down from $82.66 late Thursday. Gold was quoted at $2,007.73 an ounce, up from $1,999.98.
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