London midday: Stocks slightly lower amid retail update deluge
It was all about the retail sector on Thursday, with London stocks slightly weaker by midday as investors mulled updates from the likes of Marks & Spencer, Tesco and Halfords.
The FTSE 100 was off 0.2% at 6,896.47. At the same time, sterling was down 0.4% against the dollar at 1.2737 and 0.3% lower versus the euro at 1.1046 after British secretary of state for business Greg Clark cautioned that crashing out of the European trading bloc without a deal would be a "disaster" for the UK.
Speaking to BBC radio programme, Clark said there was no majority in parliament for a no-deal Brexit.
Meanwhile, Theresa May was reported to be looking to win support from opposition MPs for her Brexit deal ahead of next week’s vote, by promising guarantees on workers’ rights. However, she is still expected to lose the vote.
Market sentiment was fragile as investors digested lower-than-expected Chinese inflation data overnight and failed US government shutdown talks. Trade relations between the US and China were still in focus after the Chinese Commerce Industry issued a statement saying that the "extensive, deep and detailed" three-day talks between the two countries had "laid the foundations" for their dispute to be resolved.
"The right kind of noise, then, but not exactly the definitive signs of actual progress the markets were hoping for given their movements in the last few days," said Spreadex analyst Connor Campbell.
On a day packed full of retail updates, the latest figures from the British Retail Consortium and KPMG revealed the worst Christmas for the sector in a decade last month amid worries about Brexit and weak consumer confidence.
Total sales were flat in December compared to a 1.4% increase in the same month a year before, marking the worst performance since 2008. On a like-for-like basis, retail sales were down 0.7% from December 2017, when they rose 0.6% from the preceding year.
Helen Dickinson, chief executive of the BRC, said: "The worst December sales performance in ten years means a challenging start to 2019 for retailers, with business rates set to rise once again this year, and the threat of a no-deal Brexit looming ever larger."
On the corporate front, Marks & Spencer managed to reverse earlier losses and rack up healthy gains after maintaining full-year guidance but posting a 3.9% decline in third-quarter group total revenue to £3.04bn.
Lee Wild, head of equity strategy at Interactive Investor, said: "Cautious consumers, mild weather and an uninspiring offering across clothing and food haven’t helped. But a new management team packed with quality and experience has at least made a start on fixing this iconic firm lost for years in the retail wilderness.
"A 2.4% decline in like-for-like Clothing & Home sales during the 13 weeks to 29 December looks bad, but many had expected worse, and it is less than the 2.8% drop this time last year. A 4.8% slide in total sales reflects store closures. Encouraging here is the 14% growth in online sales, although there is clearly much more that could be done here.
"There are no bells and whistles here. The numbers don’t look great, but it could have been worse. Crucially, there are no shocks, and a lot of bad news is already priced in."
Grocery sector market leader Tesco was also in the green as it outshone its big four listed rivals over Christmas, with sales growth that exceeded the market and analysts' forecasts. Group sales swelled 0.5% in the third quarter ending 24 November and 1.5% in the six-week festive period to 5 January, giving 19-week growth of 0.8%.
The update helped to lift rivals, with Sainsbury's and Morrisons also trading higher.
Richard Hunter, head of markets at Interactive Investor, said: "Tesco has defied the retail gloom and delivered a pick of the bunch performance.
"The supermarket behemoth has staged a strong recovery over several years, having previously admitted that it had taken its eye off the ball in its core UK market. There is a fair amount of light between then and now, with like-for-like sales both in terms of the third quarter but also the Christmas period showing continuing growth."
It was a different picture for bikes and motor accessories retailer Halfords, which skidded 20% as it warned that underlying pre-tax profit for its current financial year would be lower than it had recently guided, at between £58m and £62m.
Meanwhile, Card Factory slumped as it reported a 0.5% decline in like-for-like sales over Christmas and warned that FY20 would be "another difficult year".
Elsewhere, B&M European Retail Value slipped into the red after its third-quarter update.
Adding to the gloom were downgrades of Burberry by Berenberg and Ted Baker by Goldman Sachs.
Outside the FTSE 350, Debenhams tanked after saying it was looking for fresh funding as like-for-like sales in the six weeks to 5 January declined by 3.4%.
Furniture retailer DFS gained, however, as it announced underlying sales growth of 10% in the five months to 30 December 2018 and said chief financial officer Nicola Bancroft was leaving the company after six years.
Mitchells & Butlers surged after the pup operator reported a strong Christmas as it welcomed record levels of festive feasting from customers looking to escape their own kitchens or in-laws.
In broker note action, Merlin Entertainment was knocked lower by a downgrade at UBS. BBA Aviation was upgraded to 'buy' at Jefferies, while Cranswick was lifted to 'buy' at Liberum.
BHP Group, Brewin Dolphin, Greencore, On the Beach Group, Paragon Banking Group, QinetiQ, UDG Healthcare, WH Smith and Workspace were among the companies whose stock went ex-dividend.
FTSE 100 - Risers
Fresnillo (FRES) 937.80p 1.78%
Marks & Spencer Group (MKS) 282.00p 1.55%
Sainsbury (J) (SBRY) 276.40p 1.39%
Morrison (Wm) Supermarkets (MRW) 219.30p 1.29%
Intertek Group (ITRK) 5,010.00p 1.13%
Compass Group (CPG) 1,673.00p 1.12%
Royal Bank of Scotland Group (RBS) 223.30p 1.09%
Tesco (TSCO) 214.10p 1.09%
Centrica (CNA) 132.00p 0.99%
Sage Group (SGE) 614.80p 0.99%
FTSE 100 - Fallers
BHP Group (BHP) 1,614.20p -5.46%
Burberry Group (BRBY) 1,750.50p -2.21%
Rolls-Royce Holdings (RR.) 846.40p -2.13%
Melrose Industries (MRO) 173.30p -1.95%
Associated British Foods (ABF) 2,227.00p -1.81%
Spirax-Sarco Engineering (SPX) 6,415.00p -1.76%
Johnson Matthey (JMAT) 2,910.00p -1.46%
GVC Holdings (GVC) 725.50p -1.29%
Direct Line Insurance Group (DLG) 322.50p -1.26%
Schroders (SDR) 2,618.00p -1.21%
FTSE 250 - Risers
Mitchells & Butlers (MAB) 285.80p 6.48%
FDM Group (Holdings) (FDM) 831.93p 6.25%
Fisher (James) & Sons (FSJ) 1,900.00p 4.74%
Rank Group (RNK) 152.20p 4.25%
Premier Oil (PMO) 78.80p 3.55%
Vivo Energy (VVO) 133.00p 3.10%
Dixons Carphone (DC.) 126.70p 3.01%
International Public Partnerships Ltd. (INPP) 161.10p 3.01%
TBC Bank Group (TBCG) 1,448.00p 2.84%
Equiniti Group (EQN) 218.50p 2.82%
FTSE 250 - Fallers
Halfords Group (HFD) 223.40p -19.81%
Card Factory (CARD) 173.00p -11.10%
Ted Baker (TED) 1,980.00p -6.60%
Merlin Entertainments (MERL) 323.00p -6.24%
Softcat (SCT) 671.00p -3.31%
Intu Properties (INTU) 108.10p -3.27%
Superdry (SDRY) 528.00p -3.21%
Brewin Dolphin Holdings (BRW) 330.60p -2.88%
Weir Group (WEIR) 1,398.50p -2.71%
Games Workshop Group (GAW) 3,130.00p -2.64%