London close: Stocks strengthen after avalanche of data

London stocks managed to close above the waterline on Friday, as investors mulled the latest retail sales, consumer confidence and business activity data.

The FTSE 100 ended the session up 0.08% at 7,276.37, and the FTSE 250 was ahead 0.59% at 19,824.77.

Sterling was also in positive territory, last rising 0.35% on the dollar to $1.2037, and strengthening 0.42% against the euro to €1.1769.

“Investors will be pleased to see that the rally in stocks remains intact, having lasted longer than some of the other rebounds we have seen so far this year,” said IG chief market analyst Chris Beauchamp.

“But they will be wary of pushing their luck too hard into next week, given the avalanche of earnings heading their way, plus a Fed decision and the first reading on US second quarter GDP that might easily provide fresh recession worries.”

In economic news, figures from the Office for National Statistics showed UK retail sales falling in June amid a growing cost-of-living crisis.

Sales dipped 0.1% on the month following a revised 0.8% fall in May and versus expectations for a 0.3% decline.

Retail sales volumes were 2.2% above their pre-Covid February 2020 levels, but down over the past year, with the figures showing that the Queen’s Platinum Jubilee failed to give shops the boost many had expected.

While food sales volumes rose by 3.1% thanks to the celebrations, non-food store sales fell 0.7% over the month.

Clothing store sales were down 4.7%, while household goods sales declined 3.7%, and automotive fuel sales volumes fell 4.3% amid record high prices.

“The cost-of-living crunch caused by record inflation continues to damage consumer confidence and stifle household spending,” said Helen Dickinson, chief executive of the British Retail Consortium.

“Discretionary spending and particularly bigger purchases were put off as consumers became increasingly concerned about the future.

“As a result, furniture sales and white goods were particularly hard hit, while food sales held up a little better.”

Elsewhere, UK manufacturing output fell in July for the first time since May 2020, according to a survey released earlier.

The S&P Global/CIPS manufacturing output index declined to 49.7 from 50.3 in June, coming in below the 50.0 mark that separates contraction from expansion.

Manufacturers cited a lack of new work to replace completed orders amid subdued client confidence and weaker global economic conditions.

The manufacturing purchasing managers’ index dipped to 52.2 in July from 52.8 the month before, hitting a 25-month low.

Meanwhile, the services PMI business activity index fell to 53.3 from 54.3 and the composite output index - which measures activity in both services and manufacturing - declined to 52.8 from 53.7.

“UK economic growth slowed to a crawl in July, registering the slowest expansion since the lockdowns of early-2021,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

“Although not yet in decline, with pent-up demand for vehicles and consumer-oriented services such as travel and tourism helping to sustain growth in July, the PMI is now at a level consistent with just 0.2% GDP growth.”

Williamson said forward-looking indicators suggested worse was still to come.

“Manufacturing order books are now deteriorating for the first time in one and a half years as inflows of new work are insufficient to keep workforces busy, which is usually a precursor to output and jobs being cut in coming months.

“Raw material buying has already slumped and hiring has slowed as companies reassess their requirements for the coming months in the face of worsening demand conditions.”

Still on data, UK consumer confidence remained at a record low in July amid surging prices and rising interest rates, according to the latest survey from GfK.

The research outfit’s consumer confidence barometer's overall index was flat on the month at -48.

It said the index for personal finances over the last 12 months was unchanged at -23, while the gauge for personal finances over the next year came in at -26, compared to -28 in June.

The index for the general economic situation over the last 12 months was -66 in July, compared to -65 the month before, while the gauge for the general economic situation over the next year was flat at -57.

Its major purchase index was -34, having stood at -35 in June.

“Consumer confidence remains severely depressed this month as the impact of soaring food and fuel prices and rising interest rates continues to darken the financial mood of the nation,” said Joe Staton, client strategy director at GfK.

“Despite a two-point uptick in our hopes for our personal financial situation for the next 12 months, which might reflect optimism over imminent change at the top of the UK government, the overall index languishes at a historic low amid acute concerns for the general economic situation.”

On the continent, business activity unexpectedly contracted in the eurozone in July as surging costs saw consumers retrench their spending.

The S&P Global flash composite purchasing managers' index (PMI) fell to 49.4 in July from 52.0 in June, the lowest since February 2021.

A reading below 50 indicates a contraction.

Across the pond finally, business activity in the United States shrank unexpectedly in July for the first time since mid-2020, according to two closely-followed surveys.

S&P Global's services sector Purchasing Managers' Index declined from a reading of 52.7 for June to 47.0 in July, against consensus expectations for 51.0.

The comparable PMI for manufacturing fared slightly better than expected, however, printing at 52.3 - down from June's level of 52.7 but above the 52.0 forecast by economists.

“Companies noted that weak demand conditions stemmed from severe inflationary pressures and hikes in interest rates, which have exerted further strain on domestic client spending,” S&P Global said in a statement.

“Foreign client demand also weakened, causing new export orders to fall for a second successive month.”

On London’s equity markets, Beazley rocketed 9.43% after the insurer posted a drop in interim pre-tax profit, but reported its best combined ratio since 2015 and lifted its 2022 combined ratio guidance to the high 80s.

Peer Lancashire Holdings was also buoyant on the news, closing up 4.78%.

Fund management service provider JTC gained 6.2% after it hailed record new business growth in its interim results.

Warehouse technology developer and half-owner of its namesake online grocer Ocado Group jumped 5.1%, a day after saying it swung to an interim EBITDA loss of £14m versus a profit of £61m a year earlier, driven largely by the retail division.

Dechra Pharmaceuticals also gained, closing up 2.43% after a slump on Thursday, when it said it raised around £180m in a discounted placing for the acquisition of US-based Piedmont Animal Health.

On the downside, Quilter was knocked 1.11% lower by a downgrade to ‘neutral’ from ‘overweight’ at JPMorgan Cazenove.

House repairs and improvements business HomeServe slipped 0.25% after it said trading had been in line with expectations, while shareholders prepared to approve a £4bn takeover by Canada’s Brookfield Asset Management.

JD Sports Fashion was down 0.46%, despite saying like-for-like sales were up 5% year-to-date, and reiterated guidance for full-year headline pre-tax profits in line with its record performance in the year ended 29 January.

HSBC, NatWest Group, Barclays and Lloyds Banking Group were 1.57%, 0.88%, 0.7% and 0.23% weaker, respectively, after the Competition and Markets Authority named them among six high street banks found to have broken rules under the Retail Banking Market Investigation Order 2017.

Metro Bank bucked the trend, however, jumping 5.13% even after being named in the CMA’s announcement, which said the bank had already refunded a handful of customers that were overcharged.

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

Market Movers

FTSE 100 (UKX) 7,276.37 0.08%
FTSE 250 (MCX) 19,824.77 0.59%
techMARK (TASX) 4,390.93 0.00%

FTSE 100 - Risers

Ocado Group (OCDO) 791.60p 5.10%
Entain (ENT) 1,188.00p 3.35%
Antofagasta (ANTO) 1,080.00p 3.15%
Unite Group (UTG) 1,207.00p 2.99%
Flutter Entertainment (CDI) (FLTR) 8,246.00p 2.77%
Howden Joinery Group (HWDN) 673.60p 2.75%
SEGRO (SGRO) 1,080.50p 2.71%
British Land Company (BLND) 489.10p 2.71%
Land Securities Group (LAND) 732.60p 2.61%
Dechra Pharmaceuticals (DPH) 3,706.00p 2.43%

FTSE 100 - Fallers

Mondi (MNDI) 1,422.50p -5.01%
Smith (DS) (SMDS) 271.80p -4.53%
Smurfit Kappa Group (CDI) (SKG) 2,745.00p -3.89%
Intermediate Capital Group (ICP) 1,425.50p -3.16%
Standard Chartered (STAN) 573.60p -2.32%
Scottish Mortgage Inv Trust (SMT) 831.40p -2.28%
BT Group (BT.A) 177.60p -1.91%
Avast (AVST) 503.00p -1.72%
Pershing Square Holdings Ltd NPV (PSH) 2,620.00p -1.69%
HSBC Holdings (HSBA) 515.90p -1.43%

FTSE 250 - Risers

Beazley (BEZ) 522.00p 9.43%
JTC (JTC) 754.00p 6.20%
Lancashire Holdings Limited (LRE) 420.80p 4.78%
Ferrexpo (FXPO) 132.60p 4.66%
Polymetal International (POLY) 205.00p 4.59%
4Imprint Group (FOUR) 3,095.00p 4.56%
Workspace Group (WKP) 590.00p 4.24%
Derwent London (DLN) 2,924.00p 3.84%
Big Yellow Group (BYG) 1,425.00p 3.56%
ASOS (ASC) 1,161.00p 3.38%

FTSE 250 - Fallers

Aston Martin Lagonda Global Holdings (AML) 484.00p -8.61%
Currys (CURY) 70.15p -3.24%
Network International Holdings (NETW) 191.20p -2.94%
Clarkson (CKN) 3,425.00p -2.70%
Fidelity China Special Situations (FCSS) 254.00p -2.50%
Carnival (CCL) 692.00p -2.23%
FirstGroup (FGP) 130.80p -1.65%
Molten Ventures (GROW) 480.60p -1.64%
Bellevue Healthcare Trust (Red) (BBH) 165.20p -1.55%
Bytes Technology Group (BYIT) 439.60p -1.48%