London close: FTSE finishes lower on UK retail sales, ECB

UK retail sales rose less than expected in June compared to the same month a year ago as unseasonably cold weather hurt clothing stores, official data showed.

The Office for National Statistics said retail sales increased 4.3% year-on-year in June, missing forecasts for a 5.1% gain and following 5.7% growth in May. On the month, retail sales fell 0.9% in June, more than the 0.5% drop estimated and after a 0.9% rise in May.

"Following the vote to leave the EU, the strong suspicion is that consumers will face higher unemployment and less favourable purchasing power as inflation rises and earnings growth is limited by companies striving to limit their costs,” said IHS Global Insight economist Howard Archer.

ECB keeps policy unchanged

The European Central Bank held fire on new policy measures, as expected by economists, but the monetary authority indicated that it may boost stimulus later this year.

The ECB's Governing Council decided to leave interest rates at 0.00%, the marginal lending facility rate at 0.25% and the deposit facility rate at -0.40%. The asset purchase programme (APP) was maintained at €80bn per month until the end of March 2017.

The ECB followed the lead of the Bank of England which last week decided against changes to policy as it awaits more data to assess the impact of the UK's vote to leave the European Union on 24 June.

In a press conference following the policy announcement, ECB President Mario Draghi reiterated that the bank was ready and willing to act if warranted. He said the ECB needed more information on the fallout from Brexit and new economic data projections, which become available at the next policy meeting in September, before considering taking further action.

Economists expect the central bank will add stimulus at the September policy meeting.

"We think the most likely option for the ECB is to extend quantitative easing beyond March 2017, possibly by six to nine months," said Barclays.

"We do not rule out further deposit rate cuts either, although we think these are less likely."

US economic data

In the US, the Labor Department said initial jobless claims unexpectedly fell to 253,000 in the week the 16 July from 254,000. Economists had pencilled in 265,000 claims.

Manufacturing conditions in the Philadelphia region unexpectedly deteriorated in July, with activity contracting, according to the latest report from the Federal Reserve Bank of Philadelphia. The diffusion index for current activity fell to -2.9 from 4.7 in June, missing expectations for an increase to 5.0. The index has been negative for nine of the past 11 months.

Sales of existing US homes unexpectedly rose in June, according to data from the National Association of Realtors. Sales were up 1.1% to a seasonally-adjusted annual rate of 5.57m from a downwardly revised 5.51m the month before. Economists had been expecting a 0.7% decline.

Separately, the US Federal Housing Finance Agency (FHFA) house prices index rose 0.2% in May from an upwardly-revised 0.3% the previous month and compared to expectations for a gain of 0.4%.

The US leading economic index rose 0.3% in June after declining 0.2% in the prior month, exceeding forecasts for a 0.2% increase.

Companies

Travel stocks EasyJet, IAG and TUI slumped as Turkey declared a state of emergency. EasyJet also reported a drop in revenue per seat and total revenue for the third quarter amid difficult trading that was hit by the terror attack in Brussels and the EgyptAir tragedy.

Mining stocks rebounded from the previous day’s drop with Anglo American, Glencore, Antofagasta and BHP Billiton in the black.

UK equipment rental company Ashtead was the biggest riser on the FTSE 100 after a positive read-across from major US rival United Rentals which reported slightly improved quarterly results overnight.

William Hill gained as chief executive James Henderson stepped down with immediate effect and was replaced by Philip Bowcock following a recent poor performance by the bookmaker.

AO World rallied as the online white goods retailer reported strong growth in first-quarter revenues.

Market Movers

FTSE 100 (UKX) 6,707.06 -0.33%
FTSE 250 (MCX) 17,065.98 0.28%
techMARK (TASX) 3,403.33 -0.39%

FTSE 100 - Risers

Ashtead Group (AHT) 1,185.00p 5.05%
Glencore (GLEN) 183.65p 4.23%
Antofagasta (ANTO) 495.20p 2.55%
Burberry Group (BRBY) 1,316.00p 1.86%
Anglo American (AAL) 788.50p 1.82%
Rio Tinto (RIO) 2,377.00p 1.62%
ITV (ITV) 190.50p 1.49%
Whitbread (WTB) 3,711.00p 1.37%
BHP Billiton (BLT) 938.70p 1.33%
Johnson Matthey (JMAT) 3,213.00p 1.20%

FTSE 100 - Fallers

easyJet (EZJ) 1,065.00p -5.50%
International Consolidated Airlines Group SA (CDI) (IAG) 405.60p -3.59%
Sky (SKY) 870.00p -3.28%
Next (NXT) 4,896.00p -2.76%
Dixons Carphone (DC.) 340.60p -2.27%
Marks & Spencer Group (MKS) 328.50p -2.06%
Hikma Pharmaceuticals (HIK) 2,527.00p -2.05%
TUI AG Reg Shs (DI) (TUI) 932.50p -1.79%
GlaxoSmithKline (GSK) 1,638.00p -1.74%
Direct Line Insurance Group (DLG) 342.00p -1.72%

FTSE 250 - Risers

William Hill (WMH) 304.90p 10.83%
AO World (AO.) 147.60p 9.82%
Restaurant Group (RTN) 325.40p 6.79%
Weir Group (WEIR) 1,562.00p 4.76%
Howden Joinery Group (HWDN) 433.80p 4.43%
International Personal Finance (IPF) 342.90p 4.35%
Vedanta Resources (VED) 520.00p 3.90%
Close Brothers Group (CBG) 1,232.00p 3.79%
Virgin Money Holdings (UK) (VM.) 240.00p 3.72%
Cobham (COB) 171.70p 3.31%

FTSE 250 - Fallers

Wizz Air Holdings (WIZZ) 1,423.00p -6.69%
IP Group (IPO) 147.30p -5.21%
DFS Furniture (DFS) 214.70p -3.85%
OneSavings Bank (OSB) 210.60p -3.26%
Metro Bank (MTRO) 1,896.00p -2.87%
NCC Group (NCC) 323.50p -2.85%
Big Yellow Group (BYG) 707.00p -2.75%
Sophos Group (SOPH) 230.60p -2.70%
Workspace Group (WKP) 694.50p -2.32%
Paysafe Group (PAYS) 390.80p -2.30%