London close: Stocks rise as Santa finally brings his rally

London stocks finished above the waterline on Wednesday after continued gains through the afternoon, as investors mulled the latest UK borrowing and retail sales figures.

The FTSE 100 and FTSE 250 both ended the session up 1.72%, at 7,497.32 and 18863.65, respectively.

Sterling was in negative territory, meanwhile, last falling 0.96% on the dollar to $1.2066, and weakening 0.73% against the euro to trade at €1.1380.

“A marginally more festive atmosphere prevails across stock markets this afternoon, with Christmas now very much within sight for most investors,” said IG chief market analyst Chris Beauchamp.

“This Santa rally has been long-expected, and eagerly-awaited, but kept being delayed by central banks, inflation data and other road bumps that have prevented any meaningful bounce developing for most of the month so far.

“Perhaps, with so little on the agenda before Christmas Day, markets finally have scope for a decent rally to round off such a difficult year.”

In economic news, official data showed public sector borrowing more-than-doubling in November, fuelled by government intervention on soaring energy bills and cost of living payments.

According to the Office for National Statistics, public sector net borrowing excluding banks (PSNB ex) was a record £22.0bn last month, well above both November 2021's £8.1bn and consensus expectations of £13bn.

It was also the highest November borrowing since monthly records began in 1993.

Fuelling the increase was a jump in UK public sector total expenditure and higher interest payments.

Central government debt interest payable rose £2.4bn year-on-year to £7.3bn, the highest November figure since April 1997, while central government day-to-day spending jumped £13.5bn to £82bn.

Public sector total expenditure was £98.9bn.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that forecast was "within reach".

“We continue to expect public borrowing to overshoot the OBR’s forecast in future years,” he added.

“Granted, we think the Bank Rate will peak at 4% next year, and expect the Monetary Policy Committee to reduce it gradually to 2% between 2024 and early 2026.

“Nonetheless, we think the OBR is wrong to assume that households will reduce their saving rate substantially, given the likely impact of higher interest rates and rising unemployment on their saving behaviour.”

Elsewhere, UK retail sales unexpectedly picked up in the run-up to Christmas, according to the latest Distributive Trades Survey from the Confederation of British Industry.

The CBI’s reported sales balance rose to +11 in December from -19 the month before, coming in well above consensus expectations for a reading of -24.

Still, the CBI said the cheer was set to be temporary, with retailers not expecting the recovery to continue into the new year.

“It’s encouraging to see retail sales surprise by growing this month, but any festive cheer is expected to be short-lived,” said principal economist Martin Sartorius.

“Retailers are bracing themselves for the chill winds that will blow through the sector this winter, with consumer spending set to be hit hard by high inflation in 2023.

“The decision by the UK government to freeze business rates from April provides some welcome relief to the retail sector.”

On the continent, German consumer sentiment looked set to improve in January thanks in part to federal energy relief packages, according to a survey from market research group GfK.

Its forward-looking consumer sentiment index for January printed at -37.8, up from a revised -40.1 in December, coming in above consensus expectations of -38.0.

The survey showed that the propensity to buy index ticked up by 2.3 points to -16.3, while the index for income expectations rose 10.9 points on the month to -43.4.

The economic expectations gauge rose 7.6 points to -10.3.

Across the pond, American consumers were unexpectedly more upbeat at the end of 2022, with the Conference Board's consumer confidence index jumping to 108.3 in December - its highest reading since the previous April - from 101.4 for November.

That was better than the dip to 101.0 expected by economists.

The shortfall on America's current account, meanwhile narrowed by a bit more than expected over the three months to September.

According to the Department of Commerce, the US current account deficit shrank to a seasonally-adjusted -$217.1bn in the third quarter, or by 9.1% from -$239.3bn during the second quarter.

Economists had forecast a deficit of -$222.0bn.

US mortgage applications rose 0.9% in the week ended 16 December, according to the Mortgage Bankers Association, cooling off from the previous week's 3.2% jump.

Applications to refinance a home loan surged 6% as consumers took advantage of a fall in mortgage rates, while applications to purchase a home edged 0.1% lower.

“The latest data on the housing market show that homebuilders are pulling back the pace of new construction in response to low levels of traffic, and we expect this weakness in demand will persist in 2023, as the US is likely to enter a recession,” said MBA economist Mike Fratantoni.

“However, if mortgage rates continue to trend down, as we are forecasting, more buyers are likely to return to the market later in the year, as affordability improves with both lower rates and slower home-price growth.”

Finally on data, existing home sales in the US slowed more than expected last month, with the National Association of Realtors reporting that existing home sales dropped at a seasonally-adjusted month-on-month pace of 7.7% in November to reach an annual rate of 4.09m.

Economists had anticipated a reading of 4.20m.

On London’s equity markets things were starting to quiet down for the festive season, although JD Sports Fashion jumped 6.09% on positive read-across from Nike’s second-quarter numbers.

Sports Direct owner Frasers Group was in the black by 2.98%, with AJ Bell’s Russ Mould noting that investors were seemingly "hopeful that a good showing from Nike means athleisure spending is more resilient than the market previously thought".

Ferrexpo gained 2.22% after saying it was now receiving sufficient levels of power to bring one iron ore pelletiser line in central Ukraine back into operation, allowing it to meet the requirements of existing customer contracts.

On the downside, Bunzl was 0.96% weaker despite saying that full-year revenues were set to jump, bolstered by high inflation and acquisitions.

Outside the FTSE 350, Tremor International rallied 6.91% following a report the advertising technology firm was considering putting itself up for sale.

According to Sky News, Tremor was understood to have appointed investment bank Goldman Sachs to help solicit takeover interest.

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

Market Movers

FTSE 100 (UKX) 7,497.32 1.72%
FTSE 250 (MCX) 18,863.65 1.72%
techMARK (TASX) 4,391.61 1.59%

FTSE 100 - Risers

JD Sports Fashion (JD.) 120.15p 6.09%
Ocado Group (OCDO) 651.60p 4.83%
Anglo American (AAL) 3,254.00p 4.02%
Persimmon (PSN) 1,239.50p 3.59%
St James's Place (STJ) 1,108.50p 3.31%
Abrdn (ABDN) 190.90p 3.27%
Prudential (PRU) 1,092.50p 3.26%
3i Group (III) 1,329.00p 3.14%
Taylor Wimpey (TW.) 102.75p 3.14%
Barratt Developments (BDEV) 407.00p 3.06%

FTSE 100 - Fallers

Bunzl (BNZL) 2,793.00p -0.96%
Halma (HLMA) 2,048.00p -0.39%
Severn Trent (SVT) 2,668.00p 0.08%
Aveva Group (AVV) 3,214.00p 0.16%
Sainsbury (J) (SBRY) 221.80p 0.59%
Spirax-Sarco Engineering (SPX) 10,750.00p 0.61%
National Grid (NG.) 1,000.50p 0.65%
InterContinental Hotels Group (IHG) 4,801.00p 0.67%
London Stock Exchange Group (LSEG) 7,154.00p 0.70%
Reckitt Benckiser Group (RKT) 5,724.00p 0.74%

FTSE 250 - Risers

Tullow Oil (TLW) 37.98p 6.57%
IWG (IWG) 157.75p 5.78%
Liontrust Asset Management (LIO) 1,076.00p 5.05%
Wood Group (John) (WG.) 133.70p 4.99%
Baltic Classifieds Group (BCG) 140.40p 4.78%
Dr. Martens (DOCS) 182.10p 4.35%
Intermediate Capital Group (ICP) 1,151.50p 4.12%
JTC (JTC) 759.00p 4.12%
Wetherspoon (J.D.) (JDW) 441.60p 4.05%
Carnival (CCL) 611.00p 3.98%

FTSE 250 - Fallers

Aston Martin Lagonda Global Holdings (AML) 157.00p -6.64%
Syncona Limited NPV (SYNC) 177.00p -2.53%
BH Macro Ltd. GBP Shares (BHMG) 4,520.00p -1.74%
Marshalls (MSLH) 264.60p -1.19%
National Express Group (NEX) 130.40p -0.91%
Apax Global Alpha Limited (APAX) 186.00p -0.85%
Ibstock (IBST) 148.30p -0.60%
Jlen Environmental Assets Group Limited NPV (JLEN) 120.40p -0.50%
PZ Cussons (PZC) 212.50p -0.47%
Octopus Renewables Infrastructure Trust (ORIT) 100.00p -0.40%