London midday: Stocks maintain small gains as pound rallies on retail sales
London stocks were still in the green by midday on Thursday, but gains were modest as the pound was lifted by an unexpected jump in retail sales last month and Brexit hopes.
The FTSE 100 was up 0.2% to 7,344.15, while the pound was up 0.6% against the dollar at 1.3228 and 0.3% firmer versus the euro at 1.1290 as data from the Office for National Statistics showed retail sales rose 0.3% month-on-month in August versus expectations for a 0.3% decline, meaning sales were up 3.3% compared to the same month last year, well ahead of the 2.2% gain expected.
The ONS also revised up July's monthly sales up to 0.9% from 0.7%, with the annual gain revised up to 3.8% from 3.5%.
Excluding fuel sales, which fell, retail sales climbed 0.3% on the month and 3.5% on the year, versus expectations of a 0.2% fall and 2.4% rise respectively.
"Retail sales remained strong in the three months to August, with continued growth across all sectors," said ONS head of retail sales, Rhian Murphy. "Food and household goods stores particularly benefitted from the warm weather when compared with last summer."
Sterling was also boosted by reports that Cabinet Office minister David Lidington said the UK government was close to a Brexit deal. Speaking to Irish radio, Lidington said Britain was 85% to 90% of the way to agreeing a Brexit deal and that this could be done by October or November.
Oanda analyst Craig Erlam said: "This is a perfect example of the kind of noise that’s impacting the markets at the moment despite not really offering anything of substance and giving any indication of whether talks are moving forward, which they don’t appear to be. But with the October and November meetings just around the corner, I don’t see this changing as traders try to get ahead of the curve."
"The UK retail sales figures were arguably more interesting and while they did provide an additional lift – taking the pound back above 1.32 against the dollar - the impact was much smaller than with Lidington’s comments, which shows just how big an impact politics is having in markets right now compared to the data."
Meanwhile, investors appeared to be brushing aside any concerns about escalating trade tensions between the US and China.
Hussein Sayed, chief market strategist at FXTM, said: "The 10% tariffs imposed by the US on $200bn worth of Chinese goods seemed to be a relief rather than a catastrophe given that markets were bracing for a 25% figure. Similarly, the Chinese response was a softer hit than anticipated after announcing that the nation won’t engage in currency devaluation."
Marks and Spencer and Primark owner Associated British Foods were both trading higher after the retail sales data.
Luxury fashion retailer Burberry was under pressure, however, following the debut runway show from new creative director Riccardo Tisci on Monday. Societe Generale said the show was not as "streetwear-meets-avant-garde fashion, endorsed by a celebrity in the front row" as some had hoped.
Outside the FTSE 350, fashion retailer French Connection was under the cosh as it reported a widening of losses in the first half amid difficult trading in the UK.
Elsewhere, Rio Tinto advanced as it outlined its plans to return around $3.2bn to shareholders through a share buyback programme following the disposal of its coal assets.
Guinness maker Diageo rose after saying that its financial year has "started well", though it has been buffeted in recent weeks by increased emerging market foreign exchange volatility.
Inmarsat rallied as it announced that it and Panasonic Avionics Corporation have agreed a strategic collaboration to provide in-flight broadband for commercial airlines.
Construction, services and property group Kier pushed as it posted a 9% rise in underlying full-year pre-tax profit thanks to a solid performance from all of its divisions and despite turbulence in its markets.
Just Group was given a leg up by RBC Capital Markets, as it said that a rights issue - which the share price is factoring in - will not be required.
IG Group tumbled after reporting a drop in first-quarter revenue as it took a hit from lower client activity and new EU regulatory measures.
British American Tobacco nudged lower as it announced that chief executive Nicandro Durante will retire next April after eight years in charge of the cigarette company, while Stobart slipped as it said full-year results for its energy division are likely to be below expectations due to delays in commissioning.
Saga fell as it announced the appointment of James Quin - formerly UK chief financial officer of Zurich Insurance Group - as group CFO with effect from 1 January 2019.
In broker note action, Aveva was lifted to 'overweight' at Barclays, while Gem Diamonds and Petra Diamonds were started at 'buy' and 'hold' respectively at Berenberg.
TP ICAP was upgraded to 'hold' at Shore Capital, while Boohoo was boosted to 'buy' by the same outfit and Weir was lifted to 'overweight' by Morgan Stanley.
GVC Holdings, Crest Nicholson, Drax, Petrofac, Rank Group, Redrow, Renishaw, Sanne, Sophos, Unite and International Public Partnerships were among the companies whose stock went ex-dividend.
Market Movers
FTSE 100 (UKX) 7,344.15 0.18%
FTSE 250 (MCX) 20,502.97 0.01%
techMARK (TASX) 3,482.66 -0.09%
FTSE 100 - Risers
Standard Chartered (STAN) 637.00p 3.16%
Fresnillo (FRES) 845.60p 2.42%
Rio Tinto (RIO) 3,797.00p 2.00%
Micro Focus International (MCRO) 1,345.00p 1.97%
St James's Place (STJ) 1,129.50p 1.62%
Marks & Spencer Group (MKS) 283.50p 1.50%
Melrose Industries (MRO) 221.40p 1.37%
Pearson (PSON) 861.20p 1.32%
Lloyds Banking Group (LLOY) 61.32p 1.31%
Antofagasta (ANTO) 846.40p 1.12%
FTSE 100 - Fallers
Burberry Group (BRBY) 2,021.00p -4.26%
WPP (WPP) 1,111.00p -2.46%
GVC Holdings (GVC) 975.50p -2.30%
Kingfisher (KGF) 242.40p -1.86%
Ashtead Group (AHT) 2,290.00p -1.55%
Bunzl (BNZL) 2,379.00p -0.92%
Rightmove (RMV) 472.05p -0.83%
GlaxoSmithKline (GSK) 1,484.40p -0.83%
NMC Health (NMC) 3,302.80p -0.82%
InterContinental Hotels Group (IHG) 4,608.00p -0.78%
FTSE 250 - Risers
Games Workshop Group (GAW) 3,770.00p 4.43%
Just Group (JUST) 74.10p 4.07%
HarbourVest Global Private Equity Limited A Shs (HVPE) 1,408.00p 3.68%
Aveva Group (AVV) 2,942.00p 3.52%
Energean Oil & Gas (ENOG) 567.00p 3.47%
UDG Healthcare Public Limited Company (UDG) 649.90p 3.08%
Contour Global (GLO) 208.40p 3.07%
Weir Group (WEIR) 1,783.50p 2.65%
Convatec Group (CTEC) 233.30p 2.37%
Kier Group (KIE) 1,064.00p 2.31%
FTSE 250 - Fallers
IG Group Holdings (IGG) 801.00p -7.29%
Spire Healthcare Group (SPI) 155.32p -5.29%
Redrow (RDW) 577.00p -3.75%
Crest Nicholson Holdings (CRST) 361.60p -3.73%
Capita (CPI) 141.35p -3.35%
Sirius Minerals (SXX) 29.10p -3.06%
Rank Group (RNK) 171.60p -2.72%
Playtech (PTEC) 486.90p -2.17%
Alfa Financial Software Holdings (ALFA) 152.00p -2.06%
McCarthy & Stone (MCS) 126.60p -1.71%