Stock prices in London were mostly higher on Friday, after data showed a steeper-than-expected decline in UK retail sales during December, appearing to lift hopes for an earlier interest rate cut.
The FTSE 100 index opened up 44.63 points, 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 European equities, 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 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.
‘Retailer after retailer has been warning that this Christmas has been a tough one and these figures lay bare just how hard things have been. Not since January 2021 when people’s ability to shop was curtailed by Covid lockdowns has such a drop off in spend been recorded, and remember that was post-Christmas rather than at the sharp end of the crucial ’golden quarter’,’ commented AJ Bell head of financial analysis, Danni Hewson.
‘The big question is did people spend their money elsewhere or not all? The answer to that is likely to be the deciding factor in whether or not the UK has fallen into a technical recession,’ she considered.
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 and Taylor Wimpey rose 2.0% and 1.0% respectively. However, retailer Marks & Spencer fell 0.6%, as Next edged down 0.2%.
Sterling was quoted at $1.2670 early Friday, pulling back from above $1.27 earlier on Friday, and $1.2687 at the London equities close on Thursday.
Meanwhile, hopes of a March interest rate cut from the US Federal Reserve continue to fade.
According to CME’s FedWatch tool, the market is pricing in a 52% probability of a 25 basis point cut in March, with a 47% likelihood rates are left on pause. A week ago, the tool indicated a 77% chance of a cut.
The euro traded at $1.0881, higher than $1.0867.
In the FTSE 250, 4imprint rose 6.6%.
The marketer and distributor of promotional products said it made ‘excellent progress’ over 2023. Revenue is expected to be $1.33 billion, which will be a 16% year-on-year increase to $1.14 billion in 2022. Pretax profit is expected to be no less than $140 million, which is up from $104 million, and slightly above the upper end of the market consensus range.
The group said it is also ‘very well funded’ entering 2024, with cash and bank deposits at $105 million at the end of 2023, up from $87 million a year before.
Meanwhile, among London’s small-caps, Wincanton jumped 47% at 437.5 pence.
The Wiltshire, England-based logistics firm said it has agreed on the terms of a recommended cash takeover offer from CEVA Logistics, a subsidiary of France’s CMA CGM.
The offer is for 450 pence a share, valuing Wincanton at £566.9 million on a fully diluted basis, with an entreprise value of around £764.9 million. The offer price represents a 52% premium to Wincanton’s closing price of 297p on Thursday.
‘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.
Meanwhile, oil rises rose in response to developments in the Middle East.
Yemen’s Houthi rebels claimed another attack on a US ship early Friday, after the US launched fresh strikes on rebel targets over their aggression towards vessels in and around the Red Sea.
While the Iran-backed rebels maintained they had struck the commercial vessel in the Gulf of Aden, the US military later said the group’s missiles had missed their mark.
Brent oil was trading at $79.19 a barrel, rising from $78.61.
In the US on Thursday, Wall Street ended higher, with the Dow Jones Industrial Average gaining 0.5%, the S&P 500 up 0.9% and the tech-heavy Nasdaq Composite jumped 1.4%.
Apple jumped 3.3% after being upgraded by Bank of America, while better-than-hoped results from Taiwan Semiconductor Manufacturing saw chipmakers push ahead.
In Asia on Friday, the Nikkei 225 index in Tokyo closed up 1.4%, benefitting from rising tech stocks as well as a weaker yen.
Japanese consumer inflation slowed again in December due to lower electricity and gas bills, government data showed, ahead of a Bank of Japan policy decision next week.
Prices in the world’s third-largest economy, excluding volatile fresh food, rose 2.3% year-on-year in December, down from 2.5% the previous month. The figure was in line with market expectations and continued a broad trend of cooling inflation over the past year, down from 4.2% in January 2023.
Although inflation remains above the Bank of Japan’s longstanding two-percent target, the bank is widely expected to keep its monetary easing measures in place on Tuesday.
Against the yen, the dollar was quoted at JP¥148.31, up versus JP¥148.11.
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 in Sydney closed up 1.0%.
Gold was quoted at $2,027.64 an ounce early Friday, higher than $2,015.55 on Thursday.
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