London close: Stocks back at November levels on trade hopes

London stocks continued to push back towards their end of November levels as investors chose to focus on signs of possibly improving trade relations between the US and China, while brushing-off uninspiring retail sales figures referencing the previous month.

The FTSE 100 was up 1.95% or 133.41 points to 6,968.33, alongside a gain for the second-tier index of 1.23% to 18,764.47, while the pound was down 0.69% against the dollar at 1.28959 and 0.41% weaker versus the euro at 1.1355.

For the week as a whole, the top flight index added 50.15 points.

On the Brexit front, a one-page document published by the Daily Telegraph detailed the logistics of a second Brexit referendum and suggested that another vote would take well over a year to organise.

Brexit aside, sentiment was underpinned by news overnight that the US might consider easing some trade tariffs against China, followed in quick succession by a report, on Friday, that Beijing had offered to embark on a six-year $1.0trn buying spree of US goods.

China was said to be aiming to reconfigure the trade relatonship between the two economic giants by reducing its trade surplus with America to zero by 2024, Bloomberg reported.

On Thursday evening, the Wall Street Journal had reported that US Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports and suggested offering a tariff rollback during trade discussions scheduled for 30 January.

However, a spokesman for the US Treasury later denied that Mnuchin or US Trade Representative Robert Lighthizer had made any such recommendation.

Meanwhile, data from the Office for National Statistics showed that UK retail sales weakened much more than expected at the end of last year.

December retail sales excluding fuel fell 1.3% month-on-month, which was worse than the 0.8% decline predicted by economists. Compared to December last year, sales were up 2.6%, versus the average forecast of 3.8%.

A sharp 2.3% monthly decline in sales for non-food shops was the key element to December's slide, driven by lower household goods sales.

November's growth was also revised down by the ONS, with the monthly rate cut to 1% from 1.2% and the year-on-year trimmed to 3.5% from 3.8%.

Averaging out growth for November and December to reduce the volatility associated with Black Friday and Christmas, sales grew by 0.3% on the month, in line with the average for 2018 as a whole. Quarter-on-quarter, growth was down 0.2%.

Sam Tombs at Pantheon Macroeconomics noted that for the past four years, every estimate of monthly growth in November has been revised down over time, while every December estimate has later been revised up.

He said December's decline largely reflects the seasonal adjustment process failing to update fully for the new pattern of spending generated by Black Friday, which has dragged more pre-Christmas shopping forward to November.

Looking past the volatility in the numbers, Tombs said it was "clear that retailers have had a tough start to the year", with quarter-on-quarter sales volumes down 0.2%. "That drop is not unprecedented - volumes fell by 0.3% in Q1- and it follows two quarters of strong growth, but it nonetheless suggests that consumers have tightened their purse strings amid rising concerns about Brexit."

Broadcaster ITV was a standout gainer throughout much of the session, rebounding from the heavy losses sustained during the previous session on the back of a downgrade by Bank of America Merrill Lynch.

Housebuilders were also on the rise following a weak session on Thursday after the latest RICS survey painted a bleak picture of the outlook for the housing market, with Barratt Developments, Persimmon and Taylor Wimpey all higher.

Airlines reversed early losses in the wake of a profit warning from Ryanair, helped in part by positive comments out of analysts at JP Morgan, although EasyJet was cut to 'neutral'.

"Europe's slowing economy; the significant unknowns surrounding Brexit; and specific issues at RYA. We consider Wizz a long-term 'buy and hold'. We think RYA and EZJ have similar upside potential but, tactically, the recent underperformance of RYA vs EZJ presents a mean reversion opportunity," JP Morgan said.

Elsewhere, cloud-enabled security software provider Sophos tumbled 20% after a nine-month trading update in which it said it expects to see a modest decline in full-year constant current billings.

On the broker note front, Antofagasta traded up despite a downgrade to 'sell' from Goldman Sachs.

Coats was initiated at 'equalweight' at Barclays and RWS Holdings was started at 'overweight'.

Market Movers

FTSE 100 (UKX) 6,968.33 1.95%
FTSE 250 (MCX) 18,764.47 1.23%
techMARK (TASX) 3,394.10 1.38%

FTSE 100 - Risers

Ashtead Group (AHT) 1,951.00p 4.39%
Melrose Industries (MRO) 169.40p 4.34%
Prudential (PRU) 1,510.00p 4.21%
Antofagasta (ANTO) 856.60p 4.01%
GVC Holdings (GVC) 714.50p 4.00%
Morrison (Wm) Supermarkets (MRW) 230.65p 3.97%
Barratt Developments (BDEV) 536.07p 3.77%
Imperial Brands (IMB) 2,488.50p 3.73%
Persimmon (PSN) 2,399.00p 3.63%
Rolls-Royce Holdings (RR.) 895.20p 3.61%

FTSE 100 - Fallers

Reckitt Benckiser Group (RB.) 5,580.70p -4.91%
Ocado Group (OCDO) 883.60p -1.84%
Fresnillo (FRES) 886.40p -1.60%
easyJet (EZJ) 1,170.50p 0.13%
Bunzl (BNZL) 2,416.00p 0.17%
Micro Focus International (MCRO) 1,498.50p 0.33%
Land Securities Group (LAND) 856.48p 0.34%
Mondi (MNDI) 1,813.50p 0.42%
Compass Group (CPG) 1,619.50p 0.50%
International Consolidated Airlines Group SA (CDI) (IAG) 619.00p 0.52%

FTSE 250 - Risers

Metro Bank (MTRO) 2,196.00p 5.88%
Entertainment One Limited (ETO) 387.60p 5.21%
Bovis Homes Group (BVS) 1,006.50p 5.17%
CYBG (CYBG) 194.90p 4.62%
Galliford Try (GFRD) 743.64p 4.59%
Aveva Group (AVV) 2,862.00p 4.53%
IntegraFin Holding (IHP) 332.35p 4.35%
Greencoat UK Wind (UKW) 134.80p 4.17%
Premier Oil (PMO) 72.70p 4.01%
Balfour Beatty (BBY) 281.10p 3.54%

FTSE 250 - Fallers

Sophos Group (SOPH) 309.60p -17.79%
Ted Baker (TED) 1,815.00p -4.27%
Superdry (SDRY) 505.50p -2.79%
Acacia Mining (ACA) 181.00p -2.66%
TBC Bank Group (TBCG) 1,454.00p -2.02%
Coats Group (COA) 82.50p -2.02%
Cineworld Group (CINE) 254.00p -1.85%
Capita (CPI) 117.50p -1.76%
Centamin (DI) (CEY) 115.00p -1.75%
F&C Commercial Property Trust Ltd. (FCPT) 128.40p -1.53%