London midday: Stocks flat but pound pops higher after retail sales

Equity markets in London were little changed by midday, but sterling popped higher following the release of better-than-expected retail sales figures.

The FTSE 100 was flat at 7,326.19, while the pound was up 0.1% to $1.2501, hitting a one-month high following the release of UK retail sales figures.

Sales in February proved much stronger than the market was expecting. Figures from the Office for National Statistics showed that sales excluding auto fuel bounced back 1.3% in February after the revised 0.3% fall the month before, beating the consensus estimate for a modest 0.3% rise.

Compared to the same month last year, retail sales jumped 4.1%, up from 2.1% in January and well ahead of the 3.2% forecast.

Volumes fell 1.4% in the three months to February compared to the three months to November, which was the weakest performance since the three months to March 2010 and only the second fall since December 2013.

Average store prices including fuel accelerated to 2.8% year on year, up from 1.9% in January and the largest growth since March 2012, with an 18.7% rise from petrol stations a key element of the impact on consumers from rising inflation.

The rise was driven in part by a recovery in big-ticket purchases, with sales at households goods stores picking up 3.7% month-on-month.

Manuel Ortiz-Olave, market analyst at Monex Europe, said the underlying figures suggest caution is needed.

“UK retail sales in February rose more strongly than all estimates. However, the underlying figures reflect increasing concern from consumers about higher inflation. The three-month rolling retail sales figure fell by 1.4% for the second consecutive month, their largest drop since 2010.

“The overall picture suggests that higher fuel and food prices remain the main lags for the retail sector, which are key to the UK’s economic growth. Therefore, although today’s retail sales data is a relief for the British economy, subsequent strong months will be needed in order to speak of a real recovery in consumer spending."

In corporate news, clothes retailer Next rallied after it reported underlying pre-tax profits fell 3.8% to £790.2m last year and warned 2017 will be "another tough year" due to a shift away from spending on clothing and a squeeze on UK wages. It's shares are still well down from their level immediately before January's profit warning.

Tesco was lifted by upgrade to ‘buy’ at Deutsche Bank, but rival Sainsbury fell after analysts cut the stock to ‘hold’.

Food producer Cranswick got a boost as Berenberg initiated coverage of the stock at ‘buy’.

Housebuilder Bovis Homes retreated as its stock went ex-dividend.

Medical technology firm ConvaTec slipped after saying it has launched its skin protectant incontinence wipes in the US.

LondonMetric Property nudged lower as it unveiled a £97m placing to fund the acquisition of “last mile assets”.

Housebuilder Crest Nicholson ticked down despite saying that the trading environment has remained robust, with good sales across its areas of operation.

Online gambling company GVC Holdings rose after it reported a surge in full-year earnings and said it will pay a second special dividend for 2016.

Halma gained ground as it said it expects full-year profit to be in line with market consensus.

IG Group slumped after it posted a 3.8% drop in third-quarter revenue in what it referred to as a “quiet period” in global financial markets.

Ted Baker shares fell despite the company reporting a jump in full-year revenue and profit.

Still to come, investors will eye a speech by Federal Reserve Chair Janet Yellen in Washington at 1245 GMT in Washington.

Market Movers

FTSE 100 (UKX) 7,326.19 0.02%
FTSE 250 (MCX) 18,960.94 0.68%
techMARK (TASX) 3,438.46 0.24%

FTSE 100 - Risers

Next (NXT) 4,149.00p 6.80%
Marks & Spencer Group (MKS) 336.40p 3.54%
Ashtead Group (AHT) 1,644.00p 2.24%
CRH (CRH) 2,850.00p 2.00%
Antofagasta (ANTO) 858.50p 1.78%
Anglo American (AAL) 1,287.00p 1.74%
easyJet (EZJ) 1,002.00p 1.73%
Royal Bank of Scotland Group (RBS) 238.70p 1.57%
Associated British Foods (ABF) 2,641.00p 1.38%
Coca-Cola HBC AG (CDI) (CCH) 2,035.00p 1.34%

FTSE 100 - Fallers

Hikma Pharmaceuticals (HIK) 2,019.00p -2.56%
Pearson (PSON) 631.50p -2.17%
BT Group (BT.A) 326.10p -1.35%
Reckitt Benckiser Group (RB.) 7,330.00p -1.35%
Kingfisher (KGF) 323.60p -1.34%
Randgold Resources Ltd. (RRS) 7,205.00p -1.23%
Merlin Entertainments (MERL) 467.90p -1.08%
Unilever (ULVR) 3,992.50p -0.82%
Imperial Brands (IMB) 3,798.00p -0.76%
British American Tobacco (BATS) 5,142.00p -0.73%

FTSE 250 - Risers

Halma (HLMA) 1,024.00p 6.72%
Marshalls (MSLH) 366.20p 4.63%
Vedanta Resources (VED) 852.50p 3.08%
Cranswick (CWK) 2,508.00p 3.08%
Dixons Carphone (DC.) 311.50p 2.98%
Kier Group (KIE) 1,494.00p 2.82%
Wetherspoon (J.D.) (JDW) 955.00p 2.74%
Savills (SVS) 900.50p 2.74%
Euromoney Institutional Investor (ERM) 1,057.00p 2.62%
G4S (GFS) 301.00p 2.56%

FTSE 250 - Fallers

Ted Baker (TED) 2,691.00p -5.25%
IG Group Holdings (IGG) 504.00p -3.82%
Allied Minds (ALM) 336.20p -3.25%
Bovis Homes Group (BVS) 894.00p -2.19%
SEGRO (SGRO) 453.50p -2.03%
Inmarsat (ISAT) 777.00p -1.83%
Galliford Try (GFRD) 1,549.00p -1.78%
Acacia Mining (ACA) 469.80p -1.67%
John Laing Infrastructure Fund Ltd (JLIF) 135.30p -1.67%
Redefine International (RDI) 36.45p -1.49%