London close: Retailers provide a lift as inflation data boosts economic hopes

UK stocks put in decent gains on Tuesday as a sharper-than-expected slowdown in inflation boosted hopes for consumer spending and pushed back projections for the first rate raise.

A strong start to corporate earnings season in the States and increased hopes for further stimulus by the European Central Bank (ECB) were also driving sentiment.

Retailers were among the best performers of the session, with updates from the likes of Wm Morrison, Greggs and ASOS impressing investors, outweighing weakness in the resource sectors.

The FTSE 100 finished up 0.6% at 6,542.

“After a lacklustre start to the week stock markets have found their footing, aided by decent results from Alcoa that have kicked off US earnings season in good form and a revival of expectations that ECB easing is on its way,” said analyst Chris Beauchamp from IG.

Markets extended gains mid-morning after government data showed that the annual rate of UK consumer price inflation slowed to just 0.5% in December from 1% the month before due to the recent collapse in oil prices. This was the lowest level since May 2000 and well below analysts’ forecasts of a slowdown to 0.7%.

Economist Azad Zangana from Schroders said while low inflation would normally be seen as a sign of economic weakness, low oil prices are likely to boost consumer spending and raise growth prospects for 2015.

“As a result, we do not expect the Bank of England to consider easing monetary policy at all in the near future,” he said.

Morrisons jumps after CEO pushed

The share price of supermarket group Wm Morrison jumped 4.5% following the news that chief executive Dalton Philips has been axed after the company delivered the worst Christmas performance of the Big Four.

Like-for-like (LFL) sales excluding fuel fell 3.1% in the six weeks to 4 January; although this was not quite as bad as the 3.8% decline analysts had predicted, it was far in excess of the declines seen at rivals Tesco and Sainsbury’s.

Industry data from Kantar also showed that increased consumer spending over Christmas helped the grocery market grow at its fastest rate since August 2014 with Sainsbury's performing the best out of the Big Four. Sainsbury's and Tesco were both rising nearly 4%.

Also in the retail sector, ASOS surged after reporting a 15% rise in retail sales over Christmas, driven by a 27% jump in sales in the UK. Broker Shore Capital said the growth in its domestic market will encourage investors following a tough 2014, which saw its share price plummet significantly.

A very strong post-Christmas update from sausage-rolls-and-sandwiches retailer Greggs led management to boast that full-year results will beat current expectations, causing the stock to sizzle. Christmas LFL sales were up 8.2%.

Bucking the trend was Debenhams whose shares dropped after the high street department store revealed that full-year margins will be at the lower end of guidance despite a record sales performance over Christmas.

Oil and gas stocks remained under pressure after Brent crude settled below the $50-a-barrel mark for the first time in almost six years on Monday. Tullow was a heavy faller as Brent fell a further 2.6% to $46.19 a barrel.

Others in the resource sectors such as Antofagasta, Glencore and Kaz Minerals were falling heavily as copper prices dropped to their lowest since October 2009.

Market Movers
techMARK 2,993.36 +0.10%
FTSE 100 6,542.20 +0.63%
FTSE 250 16,084.97 +0.89%

FTSE 100 - Risers
Admiral Group (ADM) 1,432.00p +4.68%
Morrison (Wm) Supermarkets (MRW) 184.80p +4.47%
International Consolidated Airlines Group SA (CDI) (IAG) 489.10p +4.22%
Centrica (CNA) 271.80p +4.14%
Tesco (TSCO) 212.00p +3.64%
Sainsbury (J) (SBRY) 249.00p +3.62%
ITV (ITV) 219.90p +3.48%
Marks & Spencer Group (MKS) 463.00p +3.28%
London Stock Exchange Group (LSE) 2,258.00p +2.96%
BG Group (BG.) 823.40p +2.92%

FTSE 100 - Fallers
Tullow Oil (TLW) 368.90p -4.65%
Glencore (GLEN) 268.95p -3.76%
Ashtead Group (AHT) 1,084.00p -2.95%
Shire Plc (SHP) 4,568.00p -2.83%
Antofagasta (ANTO) 709.00p -2.54%
Weir Group (WEIR) 1,692.00p -1.80%
Smith & Nephew (SN.) 1,159.00p -1.78%
Intertek Group (ITRK) 2,363.00p -1.25%
ARM Holdings (ARM) 990.00p -0.80%
United Utilities Group (UU.) 943.00p -0.74%

FTSE 250 - Risers
Greggs (GRG) 820.50p +9.47%
Tullett Prebon (TLPR) 311.20p +8.06%
Michael Page International (MPI) 453.30p +6.28%
Supergroup (SGP) 811.50p +5.53%
Drax Group (DRX) 374.80p +5.28%
Brown (N.) Group (BWNG) 407.50p +5.19%
Vesuvius (VSVS) 454.20p +4.29%
Computacenter (CCC) 618.50p +4.04%
Wetherspoon (J.D.) (JDW) 835.00p +3.99%
SIG (SHI) 168.50p +3.82%

FTSE 250 - Fallers
Kaz Minerals (KAZ) 230.50p -8.75%
Debenhams (DEB) 70.00p -6.73%
Afren (AFR) 25.89p -5.20%
Entertainment One Limited (ETO) 297.20p -4.44%
Bank of Georgia Holdings (BGEO) 2,001.00p -4.12%
Cobham (COB) 317.50p -4.08%
Betfair Group (BET) 1,484.00p -3.51%
Brit (BRIT) 257.40p -3.23%
Lonmin (LMI) 165.00p -2.94%
Fisher (James) & Sons (FSJ) 1,077.00p -2.80%