London close: Stocks higher despite US retail sales slide

London markets closed higher on Friday, although both of the main indices gave up some earlier gains on the back of fresh US data.

The FTSE 100 rose 0.36% to close at 7,871.91, while the FTSE 250 increased 0.9% to finish at 19,242.69.

Afternoon gains were limited after weak retail sales data out of the United States, with sales falling twice as fast as expected in March.

Sterling meanwhile weakened against its major trading pairs, and was last down 0.85% on the dollar at $1.2417, while it retreated 0.26% against the euro to change hands at €1.1306.

“The FTSE 100 and other European indices have rounded off the week with some more gains, taking their cue from better US earnings which show that the banking crisis of March is now a memory,” said IG chief market analyst Chris Beauchamp.

“In London, bank stocks have been the chief gainers, leading the way higher for the index as a whole.

“[They] backed up a host of UK focussed names that have been the beneficiaries of a more optimistic outlook on the UK economy - a view backed up by the strength of sterling.”

US retail sales slide faster than expected, UK inflation set to tumble

In economic news, Bank of America predicted that UK consumer price gains would drop through the rest of the year, from a rate of 10.4% in February to 3.8% by October.

However, the decision on whether to hike interest rates in May still remained uncertain.

It noted that, while the economy had been affected by negative supply shocks, two of the main drivers - energy prices and supply chains - were easing, leading to a predicted sharp decrease in inflation.

The bank also predicted that the UK's labour market remained as tight as the US, and that returning inflation to target would require keeping demand growth below the economy's potential growth rate.

Meanwhile, retail sales volumes in the US fell twice as fast as expected in March, with sales of motor vehicles, gasoline, electronics, and building materials all decreasing.

Clothing sales also declined, while non-store retailers saw a 1.9% increase in sales.

"The bigger picture is that the March retail sales numbers confirm that the apparent strength at the start of the year was nothing more than a weather-driven fluke, amplified by seasonal adjustment problems and the one-time uplift to social security payments,” said Kieran Clancy, senior US economist at Pantheon Macroeconomics.

“January and February saw 267 fewer heating degree days than normal, the second-lowest since 2000, temporarily boosting sales above its softening trend since the summer.

“We expect an outright decline in consumption in the second quarter, in part due to the negative carry-over from the small drop in February and large drop in March.”

Elsewhere, consumer sentiment in the US remained largely unchanged, with the University of Michigan's consumer confidence index coming in at 63.5 in mid-April.

The index was slightly up from 62.0 at the end of March, but economists had expected a dip to 61.8.

According to the survey’s director Joanne Hsu, improved sentiment among lower-income households was compensated for by a deterioration among higher income ones.

"While consumers have noted the easing of inflation among durable goods and cars, they still expect high inflation to persist, at least in the short run,” she explained.

“On net, consumers did not perceive material changes in the economic environment in April.”

Dechra rockets on takeover offer, Superdry slides after withdrawing guidance

On London’s equity markets, shares in Dechra Pharmaceuticals surged 33.07% after the company revealed overnight that it was in talks with EQT, a Swedish private equity firm, about a possible £4.6bn takeover.

Standard Chartered rose 4.43% after Jefferies lifted its price target on the stock to 1,000p from 950p, citing favourable operating trends.

Elsewhere, online electricals retailer AO World climbed 11.83%, after announcing that it expected full-year profit to be at the higher end of its guidance range due to cost-cutting and margin improvements.

William Hill owner 888 Holdings saw a 20.87% increase after it predicted a "significantly" higher adjusted core profit for the year, despite expecting a low-to-mid single digit percentage drop in revenue.

Boot maker Dr. Martens rallied 10.54% despite lowering its profit guidance for the second time in four months, due to higher costs at its Los Angeles distribution centre and lower wholesale revenues.

Premier Inn owner Whitbread was lifted by 2.32% following an upgrade to ‘buy’ from ‘add’ at Peel Hunt.

On the downside, fashion retailer Superdry fell 16.67% after it withdrew its full-year profit guidance due to challenging trading conditions and disappointing retail sales in February and March.

National Grid was also in the red, dropping 2.23% after it announced that the government's tax relief for capital expenditure was expected to impact underlying earnings in the 2024 to 2026 fiscal periods.

Reporting by Josh White for Sharecast.com.