London close: Stocks higher despite weaker retail sales data

(Sharecast News) - London's stock markets finished in a positive state on Friday despite weaker-than-expected UK retail sales figures.

The FTSE 100 index gained 1.26%, closing at 7,504.25, while the FTSE 250 index rose by 1.18%, finishing at 18,567.87.

In currency markets, sterling was last 0.04% stronger on the dollar, trading at $1.2419, while it weakened 0.17% against the euro to change hands at €1.1420.

"A fourth straight week of falling oil prices - by over 12% - and rapidly declining global yields have given risk-on sentiment another boost," said IG senior market analyst Axel Rudolph.

"European equity indices have seen further strong gains as the eurozone posts the largest current account surplus in over two years."

Rudolph noted that their American counterparts fared less well, as rising US jobless claims on Thursday and poor results from Walmart pointed towards a possible cooling of the US economy.

"Despite much weaker-than-expected UK retail sales, the FTSE 100 gained amid an oil price recovery from four-month lows.

"Unexpectedly strong US housing starts and building permits, a forward-looking indicator of future construction, didn't quite manage to keep US stocks in the green on the last day of their three-week gain."

Retail sales unexpectedly decline in October

In economic news, the Office for National Statistics revealed that retail sales in the UK unexpectedly declined in October due to adverse weather conditions and the ongoing cost-of-living crisis.

Retail sales saw a 0.3% drop during the month, following a revised 1.1% decrease in September, missing the anticipated 0.3% increase.

The decline was primarily driven by a 2% reduction in automotive fuel sales volumes.

Sales volumes at food stores were down by 0.3%, while non-food store sales decreased by 0.2%.

Notably, the only sector reporting growth in sales volumes was non-store retailing, with an increase of 0.8%.

Over the three months leading up to October, sales volumes fell by 1.1% compared to the previous three months.

"Retail sales fell again in October to their lowest level since February 2021 when widespread lockdown restrictions were in place," said Heather Bovill, deputy director for surveys and economic indicators at the ONS.

"After rebounding in September, fuel sales dipped with increasing prices discouraging customers, while food sales also dropped as consumers prioritised essential goods."

Bovill noted that it was "another poor month" for household goods and clothes stores, with retailers in those sectors reporting that cost-of-living pressures, reduced footfall and poor weather were hitting them hard.

"However, it was a better month for online retailers, the only main sector to report growth in October."

Meanwhile, secondary estimates for the eurozone's consumer price index for October affirmed the initial figures, underscoring a substantial drop in inflation.

That renewed hopes that the European Central Bank could consider potential interest rate cuts early next year.

According to Eurostat, the annual headline inflation remained unchanged from initial estimates, standing at 2.9% for October, down from September's 4.3%.

Consistent with the initial estimate, core inflation settled at 4.2%, a decline from the previous month's 4.5%.

"Looking ahead, the central trend in our forecast still is that inflation is set to undershoot the ECB's forecasts materially in the near term, and in particular for next year as a whole," said economist Claus Vistesen at Pantheon Macroeconomics.

Vistesen said there would likely be a rebound in headline inflation in December due to a drop in energy prices the year before, but price pressures should begin to ease after that.

As for core inflation, which excludes energy, Pantheon estimated a fall to 3.5% in December and a further fall to 2.5% by the end of the first quarter of 2024.

"This is more quickly than the ECB expected in September, guiding our view that the ECB will have room to cut its policy rate earlier than markets expect, in March."

Across the Atlantic, housing data in the US exceeded market expectations for October, as reported by the Census Bureau and the Department of Housing and Urban Development.

Privately owned housing starts increased by 1.9% to reach 1.372 million.

Although that growth was slower than September's 3.1% expansion, it surpassed the consensus estimate of 1.350 million.

Additionally, permits for new construction projects in private housing, considered a forward-looking indicator, saw a 1.1% uptick to 1.487 million.

That followed a revised 4.5% decline in September to 1.471 million, surprising analysts who had anticipated a decrease to 1.450 million.

Nancy Vanden Houten, lead US economist at Oxford Economics, said the increase in permits suggested a "resilient" housing sector amid higher interest rates and tighter credit conditions.

"Our forecast is for housing starts to weaken over the balance of the year and into the first quarter of 2024 before beginning to recover around mid-year.

"However, the permits data and the latest decline in mortgage rates lend upside risk to that outlook."

NatWest rises on broker upgrade, M&S slips after retail sales data

On London's equity markets, NatWest Group closed up 3.58% after an upgrade from Barclays, which elevated its rating for the bank from 'equalweight' to 'overweight'.

Transport company FirstGroup managed gains of 1.38% after it announced a fresh agreement with Hitachi.

FirstGroup announced plans to purchase up to 1,000 electric bus batteries, aligning with its commitment to advancing decarbonisation efforts.

AstraZeneca was ahead 0.77% after it received approval from the US Food and Drug Administration (FDA) for a novel breast cancer treatment.

London Stock Exchange Group managed to reverse earlier losses and closed the day with a gain of 1.31%.

The turnaround came after the company said after markets closed on Thursday that it was revising its growth guidance upward and initiating a new share buyback program.

Aston Martin Lagonda Global Holdings was a standout performer, jumping 5.93% after its Formula One Team revealed an agreement with US private equity firm Arctos Partners.

The deal would see Arctos Partners acquire a minority shareholding in Aston Martin.

Lawrence Stroll, executive chairman of Aston Martin Lagonda, expressed enthusiasm for the partnership, highlighting Arctos Partners' deep industry knowledge and prestigious sports franchise portfolio.

On the downside, Marks and Spencer Group was off 0.39% after the unexpected drop in UK retail sales in October.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,504.25 1.26% FTSE 250 (MCX) 18,567.87 1.18% techMARK (TASX) 4,088.80 0.81%

FTSE 100 - Risers

Standard Chartered (STAN) 660.00p 4.73% DCC (CDI) (DCC) 5,348.00p 3.48% NATWEST GROUP (NWG) 207.80p 3.43% Prudential (PRU) 945.00p 2.99% Land Securities Group (LAND) 658.80p 2.91% Flutter Entertainment (CDI) (FLTR) 12,700.00p 2.83% Barclays (BARC) 142.80p 2.70% Anglo American (AAL) 2,234.00p 2.67% RS Group (RS1) 750.20p 2.57% 3i Group (III) 2,171.00p 2.55%

FTSE 100 - Fallers

BAE Systems (BA.) 1,054.00p -0.75% Unilever (ULVR) 3,816.00p -0.51% Haleon (HLN) 326.85p -0.38% Sage Group (SGE) 982.60p -0.28% Rolls-Royce Holdings (RR.) 244.00p -0.20% Melrose Industries (MRO) 522.00p -0.11% Smith & Nephew (SN.) 1,024.50p -0.05% St James's Place (STJ) 687.40p 0.03% Marks & Spencer Group (MKS) 255.30p 0.04% Scottish Mortgage Inv Trust (SMT) 714.40p 0.14%

FTSE 250 - Risers

Aston Martin Lagonda Global Holdings (AML) 225.40p 6.12% Energean (ENOG) 912.00p 5.74% Ninety One (N91) 186.10p 5.56% Liontrust Asset Management (LIO) 606.50p 5.39% OSB Group (OSB) 387.20p 4.76% British Land Company (BLND) 367.20p 4.53% Marshalls (MSLH) 232.40p 4.50% Balanced Commercial Property Trust Limited (BCPT) 68.30p 4.27% Watches of Switzerland Group (WOSG) 603.00p 4.24% TBC Bank Group (TBCG) 2,695.00p 3.85%

FTSE 250 - Fallers

Digital 9 Infrastructure NPV (DGI9) 46.65p -7.81% Apax Global Alpha Limited (APAX) 159.00p -5.24% Octopus Renewables Infrastructure Trust (ORIT) 90.70p -3.61% Bakkavor Group (BAKK) 86.00p -3.59% PureTech Health (PRTC) 172.20p -2.82% Bluefield Solar Income Fund Limited (BSIF) 117.40p -2.17% Syncona Limited NPV (SYNC) 126.60p -2.16% ICG Enterprise Trust (ICGT) 1,226.00p -2.08% SDCL Energy Efficiency Income Trust (SEIT) 63.70p -2.00% Abrdn Private Equity Opportunities Trust (APEO) 450.00p -1.96%