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    12:03pm 21st April 2017

    LONDON MARKET MIDDAY: Stocks Drift As UK Retail Sales Slump Sharply

    LONDON (Alliance News) – Stocks in London were mixed at midday on Friday as investors await the first round of the French presidential election over the weekend, while an unexpectedly large slump in UK retail sales contrasted with positive Eurozone private sector and manufacturing data.

    The FTSE 100 index was down 0.1%, or 6.33 points, at 7,112.21. The FTSE 250 was flat at 19,382.14 points, but the AIM All-Share was up 0.1% at 945.69 points.

    The BATS UK 100 index was down 0.1% at 12,063.72, the BATS 250 was flat at 17,630.62, and the BATS Small Companies was up 0.1% at 11,693.91.

    In mainland Europe, the CAC 40 stock index in Paris was down 0.5%, while the DAX 30 in Frankfurt was up 0.1%.

    On the UK economic front, figures from the Office for National Statistics revealed retail sales including automotive fuel decreased 1.8% month-on-month in March, reversing a 1.7% rise in February. Sales were forecast to fall moderately by 0.5%. Excluding auto fuel, retail sales volume declined 1.5%, in contrast to a 1.6% rise a month ago and bigger than the expected 0.5% drop.

    On a yearly basis, growth in retail sales volume eased more than expected to 1.7% from 3.7%. Economists had forecast a 3.3% increase. Excluding auto fuel, retail sales grew 2.6%, slower than February’s 4.1% increase and the expected 3.8%.

    Following the data release, sterling dropped slightly but retained most of its recent gains since the announcement of the UK general election. The pound was quoted at USD1.2784 at midday on Friday, compared to USD1.2830 at the London equities close on Thursday.

    “There has been a mild negative reaction in the pound which has fallen back below the 1.28 handle against the US dollar since the release but this data point alone doesn’t seem to present enough of a reason for the market to change course and price remains substantially higher on the week following Tuesday’s sharp rally and looks well supported going forward,” said David Cheetham, chief market analyst at XTB.

    Meanwhile, Eurozone private sector growth hit a fresh six-year high in April, survey results from IHS Markit showed Friday. The flash composite output index rose unexpectedly to 56.7 in April from 56.4 in March. The latest reading was the highest since April 2011. Economists had forecast the score to remain unchanged at 56.4. Growth accelerated in both manufacturing and services to the highest since April 2011.

    The services Purchasing Managers’ Index climbed to 56.2 from 56.0 in March. The score was forecast to drop to 55.9. The factory PMI came in at 56.8, up from 56.2 in March. Economists has expected the index to fall to 56.0.

    “The April flash PMI is running at a level consistent with 0.7% GDP growth, up from 0.6% in the first quarter,” said Chris Williamson, chief business economist at IHS Markit.

    “In a morning packed full of economic data, there is a clear divergence between the now consistent improvements seen in the Eurozone, and the gradual deterioration of UK data ahead of Brexit negotiations,” said Josh Mahony, analyst at IG.

    “The deterioration in UK retail sales saw the monthly measure contract by the second highest amount since 2012. It is worthwhile noting that while the month-on-month retail sales figures are typically volatile, the annual figure highlights that we are seeing a consistent weakness in spending which will undermine UK retail businesses should it persist,” added Mahony.

    The positive Eurozone economic data comes as investors prepare for the first round of the French presidential election on Sunday, with polls showing all four candidates in a tight race. The extremist Islamic State has claimed responsibility for the killing of a French policeman on Paris’ Champs-Elysees on Thursday.

    Meanwhile, comments made by the US administration on Thursday revived hopes of a boost to stocks from increased government spending and lower taxes.

    US President Donald Trump on Thursday signed a presidential memorandum for a probe into the impact of foreign steel imports on US national security. Meanwhile, Treasury Secretary Steven Mnuchin said the administration planned to release its major tax reform plan “very soon”.

    Stocks in New York were called for a slightly higher open, with the DJIA seen flat, the S&P 500 index seen up 0.1% and the Nasdaq Composite seen up 0.2%.

    Wall Street ended up on Thursday, with the Dow 30 up 0.9%, the S&P 500 up 0.8% and the Nasdaq Composite up 0.9%.

    Back in London, the US administration’s comments lifted miners, with Antofagasta up 1.6%, Anglo American up 1.2%, Rio Tinto up 0.9%, Glencore up 0.7%, and BHP Biliton up 0.9%. Equipment rental firm Ashtead Group, which does much of its business in the US, also benefited, up 0.9%.

    Meanwhile, Marks & Spencer Group was up 1.8%. The retailer was initiated at Overweight by Barclays. The bank said its believes M&S management has outlined a sensible set of plans regarding its UK store estate and Clothing & Home division turnaround and also noted its strong cash generation.

    At the other end of the FTSE 100 was Reckitt Benckiser, down 1.6%. The household goods firm revealed flat like-for-like revenue in its first quarter, but said it is on track for its full-year target of 3% like-for-like growth. Reckitt reported revenue of GBP2.64 billion for the first quarter of 2017, up 15% at actual exchange rates.

    In the FTSE 250, WS Atkins was up 4.9%. On late Thursday the company confirmed it has agreed to a takeover offer from Canadian engineering services firm SNC-Lavalin Group which values the UK engineering and project management firm at GBP2.1 billion.

    TalkTalk Telecom Group was up 5.2%, after the home phone and internet provider was upgraded to Buy from Hold by HSBC.

    In the US economic calendar, Markit services and manufacturing PMIs are at 1445 BST, followed by the US Baker Hughes oil rig count at 1800 BST.

    A busy week of US earnings is rounded off by General Electric’s first-quarter results before the market open.

    Friday also sees the start of the International Monetary Fund and World Bank spring meetings in Washington. The meeting comes after the IMF raised its forecast of global economic growth for this year.

    By Adam Clark; adamclark@alliancenews.com