London midday: Stocks rise as UK retail sales data beats forecasts

London stocks rose on Thursday as official data revealed UK retail sales bounced back strongly in July, sending sterling higher.

UK retail sales rose 1.4% month-on-month in July after a 0.9% decline in June, beating forecasts for a 0.1% increase. The Office for National Statistics said the pick-up in retail sales was driven by better weather and discounts.

July sales were up 5.9% on the same month last year, up from the 4.3% gain in June and again beating the consensus estimate of a 4.2% rise.

Economist Sam Tombs at Pantheon Macroeconomics said consumers appeared to have been protected from the immediate fallout of the Brexit vote, noting that retailers had to continue to cut prices rapidly in order to get consumers to open their wallets, with the retail sales deflator falling 1.7% year-over-year.

But he warned that with firms intending to stop hiring and inflation set to soar, the high street "is set for a tough year" and expects the wider economy to slow in Q3 driven by sharp falls in business investment and de-stocking by firms.

He added: "July’s retail sales numbers do not have much impact on whether the economy will enter recession. Retail spending equates to about 20% of GDP, but since the vast bulk of goods are imported, surging high street spending does little to boost GDP growth."

The pound rose 0.89% against the dollar to $1.3158 at 1153 BST.

Elsewhere, annual inflation in the Eurozone was confirmed at 0.2% for July, according to data released by Eurostat. This was up from 0.1% in June and unchanged from July of last year, but still below the European Central Bank’s target of just under 2%.

On the month, however, prices were down 0.6%, which was steeper than the 0.5% drop forecast and the previous month’s 0.2% increase.

Meanwhile, investors continued to digest the minutes of the Federal Reserve’s last meeting which showed policymakers were divided over the timing of the next interest rate hike.

The minutes of the Fed's July meeting revealed that some policymakers believed the US economic outlook and labour market were strong enough to “warrant taking another step”. Although others believed more economic data was needed.

“Judging from the overall tone of the minutes it would appear the reality is that a strong US dollar, combined with weakening inflation gauges appears to be preventing the Fed from pulling the trigger,” said Michael Hewson, chief market analyst at CMC Markets.

“Putting that altogether and you have a perfect recipe for policy paralysis and indecision, which is a far cry from the beginning of this year when four rate hikes for 2016 appeared to be a view the Fed appeared keen to encourage.”

Looking ahead to the afternoon, the account of the ECB’s last monetary policy meeting is due at 1230 BST, US initial jobless claims will be released at 1330 BST and the Philadelphia Fed Index will be published at 1330 BST.

Among corporate stocks, miners were lifted by an increase in metal prices. Shares in Antofagasta, BHP Billiton and Anglo American gained.

Motor insurer Admiral Group rallied a day after posting record first-half turnover and profits.

KAZ Minerals shares rose as it reported a rise in first half earnings and said its new Bozshakol project is on track for commercial output in the second half.

On the downside, Pearson, Legal & General, British American Tobacco and Imperial Brands were the biggest fallers on the FTSE 100 as the stocks went ex-dividend.

Evraz shares declined as the Russian steel miner reported a drop in first half revenue due to weak steel prices and low demand.

On the commodities front, oil prices wavered as investors weighed concerns about the global supply glut against data from the Energy Information Agency showing a bigger-than-expected fall in weekly US crude inventories.

Brent crude fell 0.18% to $49.76 per barrel while West Texas Intermediate increased 0.44% to $47.00 per barrel at 1153 BST.

Market Movers

FTSE 100 (UKX) 6,863.51 0.06%
FTSE 250 (MCX) 17,838.56 0.45%
techMARK (TASX) 3,506.76 0.09%

FTSE 100 - Risers

Antofagasta (ANTO) 565.50p 4.24%
Persimmon (PSN) 1,808.00p 3.43%
Barratt Developments (BDEV) 461.80p 3.03%
Taylor Wimpey (TW.) 157.60p 3.01%
Berkeley Group Holdings (The) (BKG) 2,562.00p 2.85%
Admiral Group (ADM) 2,137.00p 2.69%
BHP Billiton (BLT) 1,074.00p 2.68%
Anglo American (AAL) 888.30p 2.61%
Hargreaves Lansdown (HL.) 1,343.00p 2.44%
Glencore (GLEN) 197.15p 2.36%

FTSE 100 - Fallers

Pearson (PSON) 862.50p -2.27%
British American Tobacco (BATS) 4,858.00p -1.80%
Imperial Brands (IMB) 4,080.50p -1.16%
Royal Bank of Scotland Group (RBS) 188.10p -1.16%
Legal & General Group (LGEN) 208.30p -1.09%
Standard Life (SL.) 350.70p -0.88%
CRH (CRH) 2,513.00p -0.87%
Royal Dutch Shell 'B' (RDSB) 2,002.50p -0.84%
AstraZeneca (AZN) 5,031.00p -0.75%
Reckitt Benckiser Group (RB.) 7,435.00p -0.69%

FTSE 250 - Risers

Kaz Minerals (KAZ) 181.10p 10.63%
Hays (HAS) 127.60p 4.42%
Thomas Cook Group (TCG) 63.95p 3.98%
Crest Nicholson Holdings (CRST) 459.30p 3.96%
ICAP (IAP) 474.90p 3.49%
Bellway (BWY) 2,217.00p 3.12%
Bovis Homes Group (BVS) 849.50p 2.97%
Clarkson (CKN) 2,211.00p 2.84%
Acacia Mining (ACA) 604.00p 2.72%
Restaurant Group (RTN) 431.00p 2.42%

FTSE 250 - Fallers

Evraz (EVR) 155.20p -10.24%
Laird (LRD) 297.40p -3.44%
Rank Group (RNK) 217.10p -3.04%
Card Factory (CARD) 284.30p -1.80%
Tritax Big Box Reit (BBOX) 141.50p -1.60%
The Renewables Infrastructure Group Limited (TRIG) 105.90p -1.58%
BGEO Group (BGEO) 2,700.00p -1.42%
Cineworld Group (CINE) 582.00p -1.27%
Greggs (GRG) 1,015.00p -1.26%
Just Eat (JE.) 582.50p -1.19%