London pre-open: Stocks seen muted; retail sales growth picks up

London stocks were set for a muted open on Tuesday as investors continued to eye the latest policy announcement from the European Central Bank and the start of US earnings season later in the week.

The FTSE 100 was called to open flat at 7,943.

Data out earlier showed that the unusually early Easter holidays gave the UK retail sector a big boost in March.

According to the British Retail Consortium-KPMG Retail Sales Monitor, total retail sales rose by 3.5% year-on-year last month, accelerating from the 1.1% annual rise registered in February, above the three-month average growth rate of 2.1% and the 12-month average growth of 2.9%.

March also saw the strongest growth rate since August 2023, with sales rising at a faster rate than inflation for the first time in more than two years, according to Linda Ellett, UK head of consumer markets at KPMG's Leisure & Retail division.

Over the three months to March, food sales were 6.8% higher than a year before, while non-food sales were down 1.9% - both in-store and online non-food sales registered a decline.

"High street sales growth was driven by food and drink, health and beauty and keen gardeners who headed outside to enjoy the first days of spring. There were also some signs of improvement with more categories starting to see positive sales growth in March for the first time in months," Ellett said.

However, Ellett said the UK retail remains a challenging environment, despite a recent improvement in macro conditions. "As April signals big increases in the sector’s cost base - through the rise in minimum wage rates and business rate hikes for the larger high street brands - retailers will be hoping that the bounce back of March sales is more than just an Easter blip," she said.

"Economic indicators are heading in the right direction with inflationary pressures easing and interest rates having potentially peaked, however consumer confidence remains fragile, and households continue to keep a close eye on where their tight budgets are being spent."

In corporate news, HSBC Holdings said it was selling its Argentina business to Grupo Financiero Galicia for $550m and will take a $1bn pre-tax loss in the process as it continued to pivot its operations towards Asia.

"HSBC Argentina is largely a domestically focused business, with limited connectivity to the rest of our international network," said HSBC chief executive Noel Quin.

Imperial Brands said in a trading update that it was on track to meet its half-year and full-year financial guidance.

The firm said strong tobacco pricing was supporting financial performance while maintaining stable market share in key combustible markets.

It was also experiencing growth in ‘next generation products’ revenue, with plans to continue scaling and launching new products, alongside capital returns through a £1.1bn share buyback programme.

Student accommodation manager and developer Unite said it is still confident in hitting rental growth targets for the next academic year while property values held more or less stable in the first quarter.

The company reiterated its guidance to deliver rental growth of "at least 6%" for the 2024/25 academic year, down from 7.4% last year.

Demand is "strong", it said, with the percentage of beds sold for the upcoming year rising to at 86% by 31 March, up from 80% at the time of its full-year results in February, though down from 90% the same time the year before.