London close: FTSE reaches record close as Morrisons leads retail rally
London stocks notched up a record closing high on Tuesday as retailers were boosted by a strong Christmas trading update from Morrisons and strong supermarket industry data.
The FTSE 100 closed 0.45% higher at 7,731.02, while the pound was down more than 0.3% versus the dollar at 1.3520.
Sterling was hit as EU Brexit negotiator Michel Barnier said the risk of a "disorderly Brexit" had increased, while a letter from Brexit Secretary David Davis to Theresa May revealed his concern that the EU "has adopted a number of measures that put agreements or contracts at risk of being terminated in the event of a ‘no deal’ scenario".
In corporate news, supermarket group Morrisons rallied as it reported a much stronger than expected Christmas period, boosted by the roll-out of its new wholesale operations.
The grocer's trading update has boosted other shares in the sector with Marks & Spencer actually rising ahead of the release of its own festive results on Thursday. Sainsbury’s also made strides but Tesco was the odd one out in trading lower by around 1% despite industry data suggesting that it was the best performer of the ‘big four’ over the festive period.
"It has been a day of good news for retailers on both sides of the Atlantic, and in the US Target’s forecast-busting numbers and upgrades to its outlook provided a reason for optimism where the US consumer is concerned. American retail spending looks more robust than its British counterpart, but with productivity in the UK now on the up, and wages perhaps looking better too, maybe the announcements from Debenhams and Mothercare will be the exception rather than the rule," said analyst Chris Beauchamp at IG.
Data from Kantar Worldpanel and Nielsen were also published, showing strong spending in UK supermarkets the three months to Christmas, while figures from the British Retail Consortium revealed that wider retail sales remained lacklustre in the industry's vital festive period due to non-food sales growth being the lowest in five years.
Sales increased 0.6% in December, the BRC found, the same as the month before, as price inflation drove a 2.6% rise in food sales that was all but wiped out by a 2.2% fall in non-food retail sales. High street sales in the three months to December of non-food items declined 4.4% on a like-for-like basis, which is the lowest rate since 2012, when the BRC's records began.
Elsewhere in corporate news, cigarette maker British American Tobacco was in the black as it said 2018 earnings would get a 6% boost from the recent US tax cuts “supporting our commitment to high single digit earnings growth and increased investment in the roll out of next generation products”.
Pets at Home was the standout gainer as Stifel updated its estimates to reflect a recent trend toward improved merchandise sales growth and greater margin investment, hiking its price target on the stock to 175p from 172p. Similarly, Kaz Minerals racked up healthy gains as Goldman Sachs said it remains constructive on metals and mining, with Kaz, Glencore, ArcelorMittal and First Quantum its top ideas.
Veterinary drug specialist Dechra Pharmaceuticals rose after it reported a 10.5% jump in half-year revenue and said changes to US taxes are expected to have a positive impact on the group, while Safestore edged up as its full-year revenues and earnings beat expectations.
On the downside, the utilities sector suffered the most, in line with a trend across European bourses, with United Utilities, Severn Trent, Centrica, National Grid and SSE leading the FTSE 100 fallers.
A possible, though convoluted, reason for move was due to a rise in US treasury yields triggered by Japan's central bank trimming its government bond purchases. Tokyo's move fed a further small bounce in the US dollar index and triggered a six basis point move higher in yields on the benchmark 10-year US Treasury note to 2.54% - its highest mark since it hit 2.63% in March of the previous year. Long-term bond yields form the basis for companies' cost of debt, which hits utilities especially hard given their high gearing.
In slightly less abstruse news, housebuilder Persimmon slipped after saying it expected full year pre-tax profits would be “modestly ahead” of market consensus, inspiring a bit of profit taking after gaining more than 30% last year and tripling over the past five years.
Shares in Just Group slumped after European private equity firm Permira sold 50m shares in the retirement specialist at 157p each in a placing that represents a stake of around 5.3%.
Market Movers
FTSE 100 (UKX) 7,731.02 0.45%
FTSE 250 (MCX) 20,166.54 -3.31%
techMARK (TASX) 3,541.01 0.41%
FTSE 100 - Risers
Anglo American (AAL) 1,677.00p 3.07%
Sainsbury (J) (SBRY) 248.40p 3.07%
Micro Focus International (MCRO) 2,201.00p 2.61%
Smurfit Kappa Group (SKG) 2,488.00p 2.56%
Marks & Spencer Group (MKS) 318.30p 2.41%
Morrison (Wm) Supermarkets (MRW) 232.30p 2.38%
Ferguson (FERG) 5,494.00p 2.31%
Carnival (CCL) 4,920.00p 2.14%
BT Group (BT.A) 273.60p 2.11%
Aviva (AV.) 516.20p 1.98%
FTSE 100 - Fallers
United Utilities Group (UU.) 782.20p -3.67%
Severn Trent (SVT) 2,063.00p -3.19%
Centrica (CNA) 141.50p -2.45%
National Grid (NG.) 850.70p -1.61%
SSE (SSE) 1,310.00p -1.47%
Just Eat (JE.) 793.00p -1.42%
Persimmon (PSN) 2,711.00p -1.35%
Bunzl (BNZL) 2,023.00p -1.27%
easyJet (EZJ) 1,508.50p -1.05%
London Stock Exchange Group (LSE) 3,719.00p -0.67%
FTSE 250 - Risers
Kaz Minerals (KAZ) 936.20p 4.49%
RHI Magnesita N.V. (DI) (RHIM) 4,313.00p 4.18%
Pets at Home Group (PETS) 174.30p 3.94%
Rotork (ROR) 289.20p 3.43%
Fidessa Group (FDSA) 2,620.00p 2.54%
Vedanta Resources (VED) 891.00p 2.46%
ZPG Plc (ZPG) 349.40p 2.40%
Equiniti Group (EQN) 280.50p 2.38%
Balfour Beatty (BBY) 300.90p 2.28%
Sirius Minerals (SXX) 24.56p 2.25%
FTSE 250 - Fallers
Just Group (JUST) 154.70p -7.75%
SIG (SHI) 164.50p -5.02%
TI Fluid Systems (TIFS) 238.40p -4.33%
SSP Group (SSPG) 654.00p -4.18%
TBC Bank Group (TBCG) 1,620.00p -3.12%
Mitie Group (MTO) 189.60p -2.32%
B&M European Value Retail S.A. (DI) (BME) 401.00p -2.12%
Pennon Group (PNN) 749.60p -2.06%
Melrose Industries (MRO) 216.60p -1.86%
Ultra Electronics Holdings (ULE) 1,253.00p -1.80%