London pre-open: Stocks seen up after US markets end off lows

London stocks were set to rise at the open on Tuesday after US markets ended off their lows, as investors mulled the latest UK retail sales figures.

The FTSE 100 was called to open 23 points higher at 7,636.

CMC Markets analyst Michael Hewson said: "With markets already nervous about delays to US rate cuts after Fed chair Jay Powell reiterated his Wednesday press conference comments that a March rate cut was unlikely, the last thing they wanted to see was ISM prices paid for January surge to their highest levels in 11 months.

"This surprise increase in prices saw European markets slide into the red, while US markets also retreated as they gave up some of their Friday gains, although they did close off the lows of the day, which should translate into a modestly higher open for markets here in Europe this morning."

On home shores, data out earlier showed that the annual rate of UK retail sales growth slowed to its lowest level in 17 months in January as non-food sales dropped despite an easing of inflationary price pressures.

Total retail sales were up by just 1.2% compared with January 2023, easing from the 1.7% year-on-year growth registered in December and the 2.7% annual increase seen in November, according to the British Retail Consortium-KPMG Retail Sales Monitor.

The last time year-on-year growth was below this level was in August 2022 when it was just 1.0%.

"Easing inflation and weak consumer demand led retail sales growth to slow. While the January sales helped to boost spending in the first two weeks, this did not sustain throughout the month," said the BRC's chief executive Helen Dickinson.

"Larger purchases, such as furniture, household appliances, and electricals, remained weak as the higher cost of living continued into its third year," Dickinson said.

"The milder temperatures meant clothing sales performed poorly, particularly winter clothing and footwear. It was better news for health and beauty products, which continued to sell extremely well."

Food sales were up 6.3% year-on-year over the three months to January, slowing from 6.8% growth registered in the three months to December, while non-food sales fell 1.8% compared with a 1.5% decline previously.

Dickinson called on the government to prioritise the needs of retailers and their customers ahead of the Spring Budget and the next general election expected at some point in the second half of 2024.

"Employing three million people and supporting families and communities in every corner of the country, retail is the ‘everywhere economy’. By addressing the cumulative burdens, from business rates’ rises, to ill-conceived new recycling proposals to border control costs, the next government can unlock retail investment and boost local and national economic growth.”

In corporate news, oil giant BP announced a $1.75bn share buyback despite a slump in annual profits.

The company said underlying replacement cost profit for 2023 halved to $13.8bn from $27.6bn a year earlier. Looking ahead, it expects first quarter 2024 reported upstream production to be higher compared to the final three months of the 2023.

Banking group Virgin Money said it has delivered a first-quarter performance in line with guidance with growth in new accounts, deposits and target lending activities at stable margins.

Mortgage lending was 0.7% lower over the three months to 31 December at £57.1bn, but the company noted "improving sentiment" in the market as interest rates have peaked.