London close: FTSE touches 8,000 level as sterling weakens

London stocks finished in the green on Wednesday, with the FTSE 100 briefly breaking the 8,000 level for the first time during the session, as investors mulled a dip in UK inflation and a better-than-expected rise in US retail sales.

The FTSE 100 ended the session up 0.55% at 7,997.83, and the FTSE 250 was 0.77% firmer at 20,172.59.

Sterling was in the red against its major trading pairs, last falling 1.22% on the dollar to $1.2025, and weakening 0.66% against the euro to change hands at €1.1262.

“Markets in Europe have seen another positive session today, and although the FTSE 100 has underperformed due to weakness in the banking sector we’ve still managed to post another record high above 8,000, as a combination of a sharp decline in headline January CPI and a weaker pound has helped to boost consumer discretionary, even as Barclays posted disappointing fourth quarter revenues and profits numbers,” said CMC Markets chief market analyst Michael Hewson.

“Starting with the gainers, a bigger than expected drop in headline CPI has helped lift housebuilders, as well as retailers in the hope that the Bank of England could be close to the end of its current rate hiking cycle.

“Consequently, we’ve seen gains for the likes of Persimmon and Barratt Developments, while the likes of Premier Inn owner Whitbread are higher along with retailers Frasers Group and JD Sports.”

Earlier in the session the FTSE 100 breached the 8,000-point mark for the first time, thanks in part to a weaker pound.

The top-flight index hit a fresh intraday high of 8,003.65 earlier, with sterling down against the dollar at 1.2018 after data from the Office for National Statistics showed consumer price inflation eased more than expected in January.

It said the annual rate of CPI fell to 10.1.% in January from 10.5% in December, coming in below analysts' expectations of 10.3%.

That was the third drop in three months, after CPI hit a 41-year high of 11.1% in October last year.

The ONS said the largest downward contribution came from transport - particularly passenger transport and motor fuels - and restaurants and hotels, helping to offset rising prices in alcoholic beverages and tobacco.

It said the figures showed fuel price inflation falling to 7.7% in January from 11.5% the month before, while food inflation remained high, at 16.7% compared to 16.8% in December.

Meanwhile, core CPI came in at 5.8%, down from 6.3% in December and versus expectations of 6.2%.

“Although still at a high level, inflation eased again in January - this was driven by the price of air and coach travel dropping back after last month’s steep rise,” said ONS chief economist Grant Fitzner.

“Petrol prices continue to fall and there was a dip in restaurant, café and takeaway prices.”

Fitzner noted that the cost of furniture decreased by more than the same time last year, in line with traditional new year discounting.

“These were offset by rising prices for alcohol and tobacco, following on from seasonal price cuts in December and a more subdued rise at the same time last year.”

Elsewhere, average UK house price growth eased in the year to December according to separate data from the ONS.

House prices were up 9.8%, down from 10.6% growth in November, with the average price standing at £294,000 - analysts had been expecting growth of 11.2%.

On the month, prices were down 0.4% following a 0.2% increase in November.

House prices in England and in Wales rose 10.3%, while prices in Scotland and Northern Ireland were up 5.7% and 10.2%, respectively.

The East Midlands saw the highest annual percentage change in the year to December, at 12.3%, while London saw the lowest of all English regions at 6.7%.

“The whack to buyer affordability over the past few months from higher mortgage rates started to weigh more heavily on house prices in December,” said Gabriella Dickens, senior UK economist at Pantheon Macroeconomics.

“We think house prices will continue to decline over the next six months or so, resulting in a peak-to-trough fall of about 8%.

“Admittedly, mortgage rates are coming back down from October’s peaks, but they still look set to remain around two and a half times higher than they were at the start of 2022, meaning someone having to refinance will see the share of their incomes absorbed by repayments jump to around 28%, from 21%.”

Dickens said a greater number of potential buyers would likely fail affordability tests, given that they had become harder to pass since Bank Rate started rising.

“At the same time, real disposable incomes look set to be hit again in the second quarter by the withdrawal of government support for energy bills.”

On the continent, industrial output in the eurozone fell at the end of 2022 amid widespread declines by goods categories, although most major economies in fact saw gains.

According to Eurostat, industrial production in the euro area fell at a month-on-month pace of 1.1% in December.

That was more than the 0.7% decline that economists had pencilled in, but was offset by an upwards revision to the prior month's reading of four tenths of a percentage point to 1.4%.

Finally on data, US retail sales unexpectedly increased in January, bouncing back from the prior month's 1.1% drop.

According to the Census Bureau, retail sales rose 3% month-on-month in January - the strongest improvement since March 2021 and well and truly ahead of expectations for 1.8% increase.

Excluding autos, sales rose 2.3% month-on-month.

The biggest increases were seen in department stores, food services and drinking places, motor vehicles and parts, furniture stores, electronics and appliances, miscellaneous stores, and clothing.

Sales at gasoline stations were flat.

The report seemingly indicated that US consumer spending remained robust after a slowdown in 2022, amid a strong labour market, wage growth and signs that inflationary pressures could be easing.

On London’s equity markets, Barclays slid 7.86% after it said annual profits fell 14%, with provisions for debt impairments increasing as the economy worsened.

The bank posted a pre-tax profit of £7bn in 2022, down from £8.2bn a year earlier and missing estimates of £7.2bn.

Credit impairment charges were £1.22bn against a net release of £653m, reflecting "macroeconomic deterioration and a gradual increase in delinquencies".

Some of the bank’s peers also lost ground, with Lloyds Banking Group down 2.62% and NatWest Group off 1.38%, although HSBC Holdings and Standard Chartered reversed earlier losses to close higher.

Glencore fell 1.57% despite announcing a $7.1bn payout to shareholders and reporting record full-year profits.

Hargreaves Lansdown reversed earlier gains to tumble 6.77% after it posted strong growth on both its top and bottom lines at the first half-year stage, despite the impact from "challenging" external conditions and low investor confidence on asset values and stockbroking volumes.

On the upside, homeware retailer Dunelm Group managed gains of 0.94% after it backed its 2023 profit guidance and reported a drop in interim profits, as expected, pointing in part to inflationary pressures.

Luxury brand Burberry Group rose 2.91% after French peer Kering reversed earlier losses to trade sharply higher following results.

Elsewhere, Ascential added 2.64% following a report the data and analytics company, which was undergoing a major restructuring, had hired JPMorgan Chase for a sale of its consumer trend-spotting business.

Defence company Babcock International was 1.58% firmer after it was awarded a £400m contract to manage and operate Skynet, the UK Ministry of Defence's military satellite communications system.

The six-year contract, set to kick off in March, would be part of the MoD's £6bn ‘Skynet 6’ programme.

Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Iain Gilbert and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,997.83 0.55%
FTSE 250 (MCX) 20,172.59 0.77%
techMARK (TASX) 4,609.26 0.86%

FTSE 100 - Risers

Scottish Mortgage Inv Trust (SMT) 768.80p 4.03%
Entain (ENT) 1,369.00p 3.71%
Rolls-Royce Holdings (RR.) 112.00p 3.36%
CRH (CDI) (CRH) 3,979.00p 3.28%
Burberry Group (BRBY) 2,476.00p 2.91%
Persimmon (PSN) 1,450.00p 2.87%
RS Group (RS1) 1,005.00p 2.76%
Whitbread (WTB) 3,141.00p 2.71%
Weir Group (WEIR) 1,877.00p 2.71%
Flutter Entertainment (CDI) (FLTR) 13,100.00p 2.58%

FTSE 100 - Fallers

Barclays (BARC) 172.60p -7.86%
Hargreaves Lansdown (HL.) 883.60p -6.77%
Lloyds Banking Group (LLOY) 52.38p -2.62%
Glencore (GLEN) 507.80p -1.57%
NATWEST GROUP (NWG) 300.80p -1.38%
GSK (GSK) 1,456.80p -0.90%
Land Securities Group (LAND) 698.60p -0.60%
Fresnillo (FRES) 789.00p -0.58%
Unite Group (UTG) 999.00p -0.50%
Endeavour Mining (EDV) 1,836.00p -0.43%

FTSE 250 - Risers

Carnival (CCL) 890.60p 4.75%
Drax Group (DRX) 665.50p 4.56%
888 Holdings (DI) (888) 70.70p 4.20%
Baltic Classifieds Group (BCG) 147.80p 4.08%
CMC Markets (CMCX) 251.00p 3.93%
Hipgnosis Songs Fund Limited NPV (SONG) 90.20p 3.68%
Senior (SNR) 153.60p 3.64%
Future (FUTR) 1,480.00p 3.50%
Network International Holdings (NETW) 279.60p 3.25%
Currys (CURY) 73.95p 3.21%

FTSE 250 - Fallers

Hammerson (HMSO) 28.93p -2.92%
PZ Cussons (PZC) 188.40p -2.59%
Trainline (TRN) 255.00p -2.45%
Harbour Energy (HBR) 307.00p -2.20%
NB Private Equity Partners Ltd. (NBPE) 1,630.00p -2.10%
Tullow Oil (TLW) 33.66p -2.04%
FirstGroup (FGP) 108.80p -1.98%
Wetherspoon (J.D.) (JDW) 503.00p -1.95%
Wizz Air Holdings (WIZZ) 2,756.00p -1.92%
Shaftesbury (SHB) 420.60p -1.91%