London close: FTSE ends higher after upbeat US data

The FTSE 100 finished the week on a high note after positive US data, including a better-than-expected report on retail sales.

Initially London stocks declined following worse-than-expected UK construction data and a warning from the International Monetary Fund about the possible impact a vote by Britain to leave the European Union would have on the economy.

UK construction output fell more than expected in March. Output dropped 3.6% month-on-month in March compared to a 0.9% fall in February and analysts’ forecasts for a 3.2% decline. Year-on-year output plunged 4.5% in March following a 0.4% decrease in February and worse than estimates for a 2.7% decrease.

IMF chief Christine Lagarde said if Britain voted to leave the EU in the 23 June referendum it would have “pretty bad to very, very bad” consequences including a stock market crash and steep fall in house prices.

Helping equities to recover in the afternoon was a batch of uplifting US data.

US retail sales jumped 1.3% last month, the largest gain since March 2015, the Commerce Department said. It compared to a 0.3% decline in March 2016 and analysts' estimates for a 0.8% increase in April. The March figure was revised from a previous estimate for a 0.4% drop.

“Fed Chair Janet Yellen will be well aware that the US consumer is the engine room of the world’s largest economy, and downbeat comments from a number of large department stores in recent days could signal tough times ahead for the off-line retail sector," said Dennis de Jong, managing director at UFX.com.

“However, today’s encouraging numbers mean that many are expecting consumer confidence to remain strong, and there are signs that the Fed is looking closely at raising borrowing rates again. Global uncertainty continues, but the US economy is actually in pretty good shape.”

A separate report showed consumer confidence improved more than anticipated in May. The University of Michigan’s preliminary estimate for its consumer confidence index rose to 95.8 in May, exceeding forecasts for a reading of 89.5 and following the previous month’s 89.0.

Business inventories also beat expectations, rising 0.4% in March compared to estimates for a 0.2% increase, the Commerce Department said. Inventories had fallen 0.1% in February.

In the eurozone, the economy grew less than expected in the first quarter, according to the flash estimate from Eurostat. Euro-area gross domestic product rose 0.5% in the first three months of the year compared to the fourth quarter. Analysts had pencilled in 0.6% quarter-on-quarter growth in the first quarter following a 0.3% gain in the previous three months.

Meanwhile, oil prices dropped after Russian Energy Minister Alexander Novak said on Thursday that he didn’t see the oil market balancing out until the first half of 2017, Reuters reported.

Brent crude fell 0.81% to $47.69 per barrel and West Texas Intermediate declined 1.19% to $46.15 per barrel at 1628 BST.

On the corporate front, Tesco’s shares rallied after saying in its annual report that its financial targets for the year “were met almost fully”.

Banking stocks also enjoyed gains including Standard Chartered, Lloyds Banking Group and HSBC.

Mining stocks were higher with Fresnillo, Antofagasta and BHP Billiton among the risers as metal prices recovered

Coca-Cola HBC was in the red after reporting a 2.7% fall in first quarter sales revenues to €1.3bn, reflecting weak emerging market currencies against a strong euro.

ITV declined as Deutsche Bank cut its target price to 185p from 200p and reiterated a ‘sell’ rating on the stock, saying the broadcaster’s first quarter results were worse than expected.

The satellite communications industry continued its dire fortnight with Inmarsat among top fallers. The slide came after its competitor Eutelsat issued a morning warning on its growth prospects, sending its own shares towards losses of 30%.

“The recent guidance cut by Inmarsat and yesterday’s cut by Eutelsat may be a coincidence, but nevertheless it calls into question Inmarsat’s explanation of its near-term guidance cut,” said analysts at Berenberg in a morning note.

Market Movers

FTSE 100 (UKX) 6,136.82 0.53%
FTSE 250 (MCX) 16,640.84 -0.11%
techMARK (TASX) 3,052.60 0.29%

FTSE 100 - Risers

Tesco (TSCO) 161.65p 3.89%
Fresnillo (FRES) 1,115.00p 3.72%
Standard Chartered (STAN) 507.10p 3.47%
Lloyds Banking Group (LLOY) 66.40p 2.30%
BHP Billiton (BLT) 822.80p 1.92%
Provident Financial (PFG) 2,835.00p 1.83%
HSBC Holdings (HSBA) 430.60p 1.66%
Morrison (Wm) Supermarkets (MRW) 189.70p 1.61%
Shire Plc (SHP) 4,129.00p 1.57%
Smith & Nephew (SN.) 1,165.00p 1.57%

FTSE 100 - Fallers

Mediclinic International (MDC) 835.50p -4.79%
Inmarsat (ISAT) 758.00p -4.53%
Coca-Cola HBC AG (CDI) (CCH) 1,349.00p -3.44%
ITV (ITV) 204.40p -2.67%
DCC (DCC) 6,160.00p -1.91%
easyJet (EZJ) 1,431.00p -1.78%
Direct Line Insurance Group (DLG) 367.40p -1.63%
TUI AG Reg Shs (DI) (TUI) 1,040.00p -1.61%
RSA Insurance Group (RSA) 469.20p -1.41%
International Consolidated Airlines Group SA (CDI) (IAG) 509.00p -1.26%

FTSE 250 - Risers

Vedanta Resources (VED) 368.50p 6.81%
Ibstock (IBST) 207.00p 6.10%
Polypipe Group (PLP) 307.00p 5.86%
Indivior (INDV) 161.70p 3.72%
Evraz (EVR) 114.90p 3.61%
Hikma Pharmaceuticals (HIK) 2,298.00p 3.47%
Virgin Money Holdings (UK) (VM.) 338.50p 3.17%
Inchcape (INCH) 688.50p 2.91%
Dunelm Group (DNLM) 925.00p 2.78%
Acacia Mining (ACA) 336.40p 2.72%

FTSE 250 - Fallers

Ocado Group (OCDO) 271.70p -8.30%
Lookers (LOOK) 131.00p -5.89%
TalkTalk Telecom Group (TALK) 261.00p -3.01%
Just Eat (JE.) 405.20p -2.92%
NCC Group (NCC) 278.10p -2.73%
Entertainment One Limited (ETO) 179.80p -2.71%
IP Group (IPO) 152.10p -2.69%
Aldermore Group (ALD) 185.40p -2.68%
CLS Holdings (CLI) 1,607.00p -2.61%
Micro Focus International (MCRO) 1,525.00p -2.43%