London’s FTSE 100 was on the up heading into Friday afternoon, as interest rate sensitive stocks got a boost after softer a UK retail sales reading swung the interest rate pendulum back in favour of a Bank of England cut in the first half of the year.
Equities earlier this week had been spooked by a hotter-than-expected UK inflation reading. But weaker economic data could suggest the BoE’s work is done.
‘With growth tracking below potential, wage inflation softening, labour market slack widening, and CPI on course to reach the bank’s 2% target as early as April, any further effective tightening may ultimately be seen as unwarranted,’ analysts at Deutsche Bank commented.
The FTSE 100 index was up 33.93 points, 0.5%, at 7,493.02. The FTSE 250 was up 45.90 points, 0.2%, at 18,993.94, though the AIM All-Share was down 1.44 points, 0.2%, at 739.57.
The Cboe UK 100 was up 0.4% at 748.85, the Cboe UK 250 was up slightly at 16,407.34, and the Cboe Small Companies was up 0.4% at 14,942.49.
Investors on Friday spent the morning digesting the latest UK retail sales data for December.
According to the Office for National Statistics, retail volumes saw their largest monthly fall since January 2021, amid Covid-19 restrictions. This came as a shock to the market, which had been expecting only a slight decline.
Retail sales fell 3.2% in December from November, coming in well below market consensus. A monthly decline of 0.5% was forecast, according to FXStreet. In November, retail sales had risen 1.4% from October.
‘While these figures have registered at surprisingly depressed levels, it is likely to be a result, at least in part, of consumers bringing forward much of their spending to take advantage of Black Friday and other discounting in November. It is too early to say whether December’s retail sales figures are a blip or an indication of something broader,’ said Daniel Mahoney, an economist at Handelsbanken.
The signs of a faltering domestic economy helped to lift stocks in interest rate-sensitive sectors, as investors hoped the Bank of England might be quicker to begin cutting rates.
Housebuilders Persimmon, Taylor Wimpey, and Barratt Developments were up 2.6%, 0.6%, and 0.5%, respectively.
Persimmon got an extra boost, as broker Morgan Stanley raised its rating to ’overweight’ from ’underweight’.
Retailers, on the other hand, struggled. Next and Marks & Spencer both fell 0.4%.
Across the pond, focus is also on the interest rate outlook. Strong data from the US has tempered expectations about a March rate cut.
On Thursday, data showed that new jobless claims fell by more than expected in the most recent week, signalling a strong labour market.
According to the US Department of Labor, new jobless claims totalled 187,000 in the week ended January 13. This is down from last week’s revised level of 203,000. The previous week’s level was revised up by 1,000 from 202,000.
The latest reading came in much lower than FXStreet-cited consensus of 207,000 and is the lowest level for initial claims since September 24, 2022 when it was 182,000.
‘Another surprise drop in jobless claims suggests that a rate cut two months from now looks increasingly unrealistic,’ said analysts at ING.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.3%, the S&P 500 index up 0.5%, and the Nasdaq Composite up 0.8%.
In European equities on Friday, the CAC 40 in Paris was up 0.1%, while the DAX 40 in Frankfurt was up 0.3%.
The pound was quoted at $1.2683 at midday on Friday in London, down slightly compared to $1.2687 at the equities close on Thursday. The euro stood at $1.0887, higher against $1.0853. Against the yen, the dollar was trading at JP¥148.11, unchanged from Thursday.
In the FTSE 100, Flutter Entertainment continued to makes gains, following Thursday’s 16% jump. It rose 3.2% at midday Friday.
Flutter, which owns Paddy Power, Sky Bet and Betfair, said it traded well over the fourth quarter, reporting double-digit revenue growth at the end of 2023, and for the year as a whole.
In the FTSE 250, 4imprint shot up 16%.
The London-based marketer and distributor of promotional products said revenue for 2023 is expected to be $1.33 billion, up 16% from $1.14 billion a year earlier.
Pretax profit for 2023 is expected to be at least $140 million, up from $104 million and slightly above the upper end of the current range of analysts’ forecasts.
‘Excellent progress has been made by the group during the course of 2023, giving rise to a strong financial performance for the year,’ 4imprint said.
Amongst London’s small-caps, Wincanton rose 48% to 439 pence.
The Wiltshire, England-based logistics provider agreed on the terms of a recommended cash takeover offer from CEVA Logistics UK, a subsidiary of CMA CGM, a shipping and logistics company based in Marseille, France. The offer is for 450 pence a share, valuing Wincanton at £566.9 million on a fully diluted basis, with an enterprise value including debt of around £764.9 million.
‘The intended acquisition of Wincanton represents an attractive growth opportunity that is in line with Ceva’s expansion strategy. It is a unique opportunity to expand Ceva’s offering in the UK, and to acquire complementary grocery and consumer expertise,’ the firms said.
Custodian Property Income shares fell 11% to 71p each.
Custodian Property Income agreed an all-share merger with abrdn Property Income Trust to create a real estate investment trust with combined assets of £1.0 billion.
abrdn Property Income shareholders will receive 0.78 of a new Custodian Property Income share for each share held. Based on Custodian’s closing share price on Thursday of 79.6 pence, the deal values abrdn Property Income shares at 62.1p and the entire company at £237 million.
abrdn Property Income shares jumped 10% to 53.03p.
Brent oil was quoted at $79.02 a barrel at midday in London on Friday, up from $78.61 late Thursday. Gold was quoted at $2,031.44 an ounce, up against $2,015.55.
Still to come on Friday’s economic calendar, there is US home sales data at 1500 GMT, to close off a busy week.
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