London close: Retailers carry FTSE to a positive finish

London stocks managed a positive finish on Thursday after a lacklustre start, with retailers on the rise after well-received updates from the likes of Next and B&M.

The FTSE 100 ended the session up 0.64% at 7,633.45, and the FTSE 250 was ahead 0.37% at 19,463.43.

Sterling was in the red, meanwhile, last trading down 1.31% on the dollar at $1.1897, as it weakened 0.51% against the euro to change hands at €1.1311.

“In what has been a positive start to the year European markets have seen a bit of a pause today in the wake of last night’s release of the latest Fed minutes, today’s better than expected US jobs data, and ahead of tomorrow’s US December jobs report,” said CMC Markets chief market analyst Michael Hewson.

“Having slowed the pace of its rate rises to 50-basis points last month, the US central bank appears to be in no mood to call an imminent halt to its policy of raising rates.”

There were, however, signs on the margins of a rise in concern about the pace of current rate policy, Hewson noted, and that a slower pace would be required even as the end point for calling a halt was pushed further out.

“The FTSE 100 has shrugged off today’s softer vibe in Europe, with another positive session as it benefits from resilience in consumer discretionary and banks, as a host of different retailers report some resilient quarterly updates in the lead-up to Christmas, while a weaker pound is also lending support.”

In economic news, the UK services sector remained in contraction territory at the end of last year according to a survey released earlier.

The S&P Global/CIPS purchasing managers’ index (PMI) for the sector rose to 49.9 from 48.8 in November, coming in below the initial estimate of 50.0, which is also the level that separates contraction from expansion.

Around 40% of the survey panel said they expect a rise in business activity over the next 12 months, while 16% expect a decline.

Survey respondents commented on squeezed disposable incomes, elevated recession risks and a housing market downturn as key factors likely to constrain demand in the year ahead.

“UK service providers ended the year with another downturn in new orders as strong inflationary pressures and worries about the economic outlook sapped demand,” said Tim Moore, economics director at S&P Global Market Intelligence.

“Overall levels of business activity fell only fractionally, despite an exceptionally challenging business environment and spending cutbacks due to cost-of-living difficulties.”

Moore said stalling recruitment and lower backlogs of work added to signs that service sector companies were now experiencing fewer capacity pressures.

“Business optimism has recovered from the lows seen in the wake of last September's 'mini-budget', but many firms are braced for a sustained period of subdued demand in 2023.”

Elsewhere, UK new car registrations fell last year amid supply chain shortages, according to figures from the Society of Motor Manufacturers and Traders (SMMT).

Overall registrations for 2022 declined by 2% to 1.61 million - the lowest level since 1992 - which is around 700,000 units below pre-pandemic levels.

Still, the UK reclaimed its position as Europe’s second-largest market, the SMMT said.

The data also showed that battery electric vehicles had a market share of 16.6% of registrations in 2022, surpassing diesel for the first time to become the second-most popular powertrain after petrol.

“The automotive market remains adrift of its pre-pandemic performance but could well buck wider economic trends by delivering significant growth in 2023,” said SMMT chief executive Mike Hawes.

“To secure that growth - which is increasingly zero emission growth - the government must help all drivers go electric and compel others to invest more rapidly in nationwide charging infrastructure.”

On the continent, the eurozone’s construction sector was suffering a “sustained contraction”, according to the latest PMI survey by S&P Global.

December’s readout showed the total activity index fell to 42.6, down from 43.6 in November and making the eighth consecutive fall.

Activity fell in the bloc’s three biggest economies of Germany, France and Italy as the war in Ukraine and soaring energy costs impacted the sector.

German exports meanwhile fell in November according to official data, as trade with its biggest commercial partners, including China, slowed.

Europe's largest economy exported €135.1bn worth of goods, a 0.3% fall on September, according to seasonally-adjusted figures from federal statistics agency Destatis.

Figures for October were revised upwards, showing an 0.8% increase on the previous month, instead of the 0.6% fall previously announced.

Across the pond, unemployment claims were stronger than expected in the US during the final week of 2022, reflecting lower layoffs and only slightly decreased hiring over holidays.

According to the US Department of Labor, initial jobless claims fell by a seasonally-adjusted 19,000 to 204,000 over the week ended 31 December.

Economists had been expecting a reading of 223,000.

Private sector employment in the US rose more than expected in December, however, according to the latest data from ADP.

Employment increased by 235,000 from November, versus expectations for a 150,000 jump, with the figures also showing that annual pay was up 7.3% on the year.

Small businesses with fewer than 50 employees added 195,000 jobs, while medium businesses with between 50 and 499 employees added 191,000 jobs.

Large businesses with more than 500 employees shed 151,000 jobs.

Staying stateside, US job cut announcements fell at the end of 2022 closing off a year that saw the second-lowest total tally since 1993, according to a closely-followed employment survey.

Challenger, Gray and Christmas said lay=off announcements dropped by 43% month-on-month in December to reach 43,651.

In the same month one year earlier they rose by 19,000..

Finally on data, activity in China’s services sector improved in December, but remained in contraction territory.

The Caixin services PMI rose to 48.0 from 46.7 in November, coming in ahead of consensus expectations for a reading of 46.8.

New orders increased 0.7 points to 47.9, while new export orders fell 2.0 points to 48.2.

“Optimism improved significantly ... service providers expressed strong confidence in an economic recovery following the easing of Covid containment measures,” said Caixin Insight Group’s senior economist Wang Zhe.

On London’s equity markets, high street fashion stalwart Next jumped 6.89% after it lifted its full-year profit guidance, reporting better-than-expected sales over the Christmas period.

In the nine weeks to 30 December, full price sales rose 4.8% versus last year - £66m ahead of the company’s previous guidance of a 2% decline for the period.

Next said that both the retail and online segments had exceeded its expectations, with retail "particularly strong".

The company upgraded its full-year pre-tax profit guidance by £20m to £860m, up 4.5% on the year.

General merchandiser B&M European Value Retail also gained, rising 0.49% on upgraded profit expectations as it announced a special dividend after a 12.3% rise in third quarter revenue.

The company, with operations in the UK and France, was now expecting annual adjusted core earnings to be in the range of £560m to £580m, ahead of current analysts' consensus estimates of £557m.

Retailers got a boost overall, with JD Sports Fashion up 3.07%, Primark owner Associated British Foods ahead 4.3%, Frasers Group rising 3.4% and Marks and Spencer Group 3.42% firmer.

“The bricks and mortar retail channel is far from dead, judging by the latest round of retail sector trading updates,” said Russ Mould, investment director at AJ Bell.

“We’re now many months into a severe cost-of-living crisis, yet the latest figures would suggest that certain retailers can still draw in the crowds if the proposition is seen to be good value for money.

“Next isn’t necessarily the cheapest fashion or home retailer, but its products are considered good quality and something that will last.”

Elsewhere, Wizz Air Holdings jumped 12.84%, easyJet ascended 5.89%, and BA and Iberia owner IAG flew 2.84% higher after Ryanair lifted its profit guidance on Wednesday.

Standard Chartered leapt 6.78% after First Abu Dhabi Bank said it was no longer interested in buying the emerging markets-focussed financier.

Responding to press speculation, First Abu Dhabi confirmed it had previously been at the "very early stages" of evaluating a possible offer for Standard Chartered, but was no longer doing so.

On the downside, Greggs lost 0.98% even after the bakery chain backed its full-year expectations as it posted an 18.2% jump in fourth-quarter like-for-like sales.

In broker note action, Prudential was hit 1.82% by a downgrade to ‘underperform’ at Exane, while HSBC Holdings was given a 4.01% leg up by an upgrade to ‘buy’ from ‘hold’ at Jefferies.

Elsewhere, educational publisher Pearson was knocked 5.87% lower by a rating downgrade at Bank of America Merrill Lynch.

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

Market Movers

FTSE 100 (UKX) 7,633.45 0.64%
FTSE 250 (MCX) 19,463.43 0.37%
techMARK (TASX) 4,486.75 0.22%

FTSE 100 - Risers

Next (NXT) 6,518.00p 6.89%
Standard Chartered (STAN) 705.20p 6.78%
Associated British Foods (ABF) 1,744.50p 4.30%
Anglo American (AAL) 3,315.00p 4.25%
HSBC Holdings (HSBA) 565.30p 4.01%
Antofagasta (ANTO) 1,610.50p 3.64%
Frasers Group (FRAS) 761.00p 3.40%
JD Sports Fashion (JD.) 139.40p 3.07%
International Consolidated Airlines Group SA (CDI) (IAG) 138.36p 2.84%
Kingfisher (KGF) 253.90p 2.67%

FTSE 100 - Fallers

Pearson (PSON) 898.40p -5.87%
Croda International (CRDA) 6,516.00p -3.29%
Haleon (HLN) 313.00p -2.96%
SEGRO (SGRO) 782.00p -2.52%
Fresnillo (FRES) 946.20p -2.19%
Rentokil Initial (RTO) 520.40p -1.92%
Prudential (PRU) 1,217.00p -1.82%
Aviva (AV.) 448.70p -1.77%
Unite Group (UTG) 923.00p -1.76%
Experian (EXPN) 2,845.00p -1.63%

FTSE 250 - Risers

Wizz Air Holdings (WIZZ) 2,364.00p 12.84%
Watches of Switzerland Group (WOSG) 928.00p 7.59%
Bodycote (BOY) 638.00p 6.69%
Dunelm Group (DNLM) 1,088.00p 6.56%
easyJet (EZJ) 375.60p 5.89%
Darktrace (DARK) 285.00p 5.83%
Hilton Food Group (HFG) 580.00p 5.65%
Moonpig Group (MOON) 121.20p 4.84%
Marshalls (MSLH) 305.40p 4.59%
Ferrexpo (FXPO) 166.30p 4.53%

FTSE 250 - Fallers

RIT Capital Partners (RCP) 1,990.00p -9.55%
Vesuvius (VSVS) 404.40p -4.26%
HarbourVest Global Private Equity Limited A Shs (HVPE) 2,330.00p -4.12%
Big Yellow Group (BYG) 1,163.00p -2.84%
Grainger (GRI) 254.20p -2.38%
Safestore Holdings (SAFE) 966.00p -2.13%
Tritax Eurobox (GBP) (EBOX) 64.50p -2.12%
CLS Holdings (CLI) 157.80p -2.11%
Playtech (PTEC) 534.00p -2.11%
Petershill Partners (PHLL) 164.20p -1.91%