London close: Oil giants help stocks finish higher

The FTSE 100 ended the session up 0.4% at 7,361.31, and the FTSE 250 was ahead 0.33% at 18,648.96.

Sterling was meanwhile in a mixed state, and was last 0.25% stronger on the dollar at $1.2178, while it weakened 0.05% against the euro to change hands at €1.1465.

“It’s been a modestly positive start to the week for European markets after the declines of last week, and as we head into the dying embers of a year that has seen some significant volatility and weakness,” said CMC Markets chief market analyst Michael Hewson.

“Reports that the UK government is looking at extending the energy support package beyond April while acting as a positive for some businesses like JD Wetherspoon and Wagamama’s owner Restaurant Group, is also acting as a tailwind for UK yields over concerns it might make inflation slightly stickier in the longer term.

“Basic resources have also seen a modest rebound on the back of a pledge by the Chinese government to stabilise the economy in the coming weeks, despite continued rising Covid infections.”

In economic news, output in the UK manufacturing sector fell in December amid rising inflation, according to the Confederation of British Industry’s industrial trends survey.

The CBI’s total orders balance declined to -6 from -5 in November, although this was ahead of expectations for a reading of -9.

Meanwhile, the net balance of manufacturers planning to raise output prices rose to +52 in December from +47 the month before, coming in well above the average since 1978 of +13.5.

“The corrosive effect of higher inflation on demand is increasingly clear, as manufacturing output contracted at the fastest pace in two years over the last quarter,” said CBI deputy chief economist Anna Leach.

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said the survey suggests the manufacturing sector is on the brink of a recession, despite holding up better than other surveys.

"The total orders balance remained above its average since January 2020, -8, in stark contrast with the S&P Global/CIPS manufacturing PMI,” she said.

“This balance, however, is not seasonally adjusted and has risen by an average of two points in each December since 1978.”

Elsewhere, retailers looked set for a subdued Christmas according to fresh industry data, after rail strikes and the cold weather deterred already hard-pressed shoppers.

Retail consultancy Springboard said footfall in the week beginning 11 December fell 4.6% on the previous week, or 0.9% year-on-year.

Compared to the same week in 2019, it was off 20.1%.

Within that, footfall fell 1.8% year-on-year on high streets and retail parks, and rose 1.8% at shopping centres.

Week-on-week, footfall tumbled 10.2% on high streets, hit by both the rail strikes and cold snap, which saw snow and freezing temperatures across much of the UK.

“The week prior to Christmas should have been a peak trading week for retail destinations and stores, with footfall expected to rise from the week before as Christmas shopping moves towards its zenith,” said Diane Wehrle, insights director at Springboard.

“Instead, footfall took a tumble.

“While the cold weather prevailed, which would undoubtedly have had some impact, the contrasts with the results for the week before clearly demonstrate that it was the rail strikes that were the key impact on footfall.”

The UK was meanwhile warned of a lengthy recession by KPMG, as high inflation and rising interest rates looked set to squeeze incomes throughout 2023.

Publishing its latest UK economic outlook, the accounting giant predicted that the recession would be "shallow but protracted", with GDP expected to shrink by 1.3% across 2023.

There was then likely to be only a partial recovery in 2024, with growth forecast to be 0.2%.

Between the third quarter of 2022, when the UK was estimated to have fallen into recession, and the end of 2023, output was forecast to fall by 1.9%.

“The increase in energy and food prices during 2022, as well as higher overall inflation, have significantly reduced household’s purchasing power,” said Yael Selfin, chief economist at KPMG UK.

“Rising interest rates have added another headwind to growth.

“Households are expected to rein in spending on discretionary items in 2023 in response to the squeeze on incomes.”

On the political front, the Treasury announced that chancellor Jeremy Hunt would set out his spring budget on 15 March, amid a cost-of-living crisis and rising anger over depressed public sector wages.

The statement would include forecasts of the economy as it headed into a widely-forecast and long recession.

On the continent, German business sentiment improved "considerably" in December, according to a survey from the Ifo Institute.

The business climate index rose to 88.6 from 86.4 in November, coming in ahead of expectations for a reading of 87.4.

Ifo said the current situation index meanwhile improved to 94.4 from 93.2, while the expectations gauge increased to 83.2 in December from 80.2 a month earlier.

“German business is entering the holiday season with a sense of hope,” said Ifo president Clemens Fuest.

Finally across the pond, housebuilder sentiment in the US recorded its 12th straight monthly decline at the end of the year, on the back of higher mortgage interest rates and construction costs.

The National Association of Home Builders' confidence index slipped by two points from November to reach a reading of 31 in December.

That reading was also the lowest since the middle of 2012, aside from the spring of 2020 when the pandemic first hit.

“Our latest survey shows 62% of builders are using incentives to bolster sales, including providing mortgage rate buy-downs, paying points for buyers and offering price reductions," said NAHB chairman Jerry Konter.

“But with construction costs up more than 30% since inflation began to take off at the beginning of the year, there is little room for builders to cut prices.

“Only 35% of builders reduced home prices in December, edging down from 36% in November.”

On London’s equity markets corporate news was thin on the ground ahead of the Christmas break, although oil giants Shell and BP gushed 1.96% and 2.46% higher, respectively, as oil prices rose.

Hospital operator Spire Healthcare Group managed gains of 0.45% after it announced the acquisition of the Doctors Clinic Group, an integrated provider of occupational health and private GP services, for £12m.

Passenger transport operator FirstGroup rose 4.38% after announcing late on Friday that it had finalised the sale of all but two of its US legacy Greyhound portfolio to Twenty Lake Holdings in a £122m deal, while also unveiling a share buyback.

It had announced the sale of the Greyhound portfolio in September, with assets and liabilities expected to fetch £140m in proceeds at the end of the next financial year.

“Accordingly, following the receipt of the Greyhound proceeds and in light of the group’s cash generative operations and strong net cash financial position, the group is launching a share buyback programme to purchase up to 75 million ordinary shares of 5p, in line with the group’s existing authority granted by shareholders, which will commence on 19 December,” it said.

The share buyback programme would end no later than 18 December next year.

On the downside, JD Sports Fashion lost 2.07% after saying late on Friday that it had sold its interests in a number of fashion brands to Frasers Group for up to £47.5m.

“The divestment to Frasers may raise an eyebrow or two given the characters behind the development of these two groups, namely Peter Cowgill and Mike Ashley,” noted Shore Capital.

“However, from the surface this looks like sensible activity by JD's new chief executive officer Regis Schultz centred upon focus and simplification.”

In broker note action, electricals retailer Currys slid 4.31% after a downgrade to ‘hold’ at Investec.

Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Abigail Townsend and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,361.31 0.40%
FTSE 250 (MCX) 18,648.96 0.33%
techMARK (TASX) 4,344.49 0.08%

FTSE 100 - Risers

Melrose Industries (MRO) 128.00p 3.18%
Airtel Africa (AAF) 113.00p 2.82%
BP (BP.) 466.60p 2.46%
Beazley (BEZ) 649.00p 2.20%
Weir Group (WEIR) 1,678.00p 2.04%
Shell (SHEL) 2,287.00p 1.96%
CRH (CDI) (CRH) 3,233.50p 1.95%
Smith (DS) (SMDS) 317.30p 1.80%
Rolls-Royce Holdings (RR.) 88.84p 1.73%
M&G (MNG) 182.85p 1.53%

FTSE 100 - Fallers

London Stock Exchange Group (LSEG) 7,134.00p -2.81%
Rightmove (RMV) 516.60p -2.75%
Auto Trader Group (AUTO) 521.80p -2.36%
JD Sports Fashion (JD.) 115.65p -2.07%
Next (NXT) 5,530.00p -1.71%
Berkeley Group Holdings (The) (BKG) 3,738.00p -1.58%
Barratt Developments (BDEV) 393.70p -1.50%
Scottish Mortgage Inv Trust (SMT) 728.80p -1.11%
Spirax-Sarco Engineering (SPX) 10,735.00p -1.11%
Entain (ENT) 1,309.50p -1.06%

FTSE 250 - Risers

FirstGroup (FGP) 102.40p 4.38%
Syncona Limited NPV (SYNC) 184.60p 4.29%
Sirius Real Estate Ltd. (SRE) 73.10p 3.84%
Octopus Renewables Infrastructure Trust (ORIT) 103.00p 3.41%
Helios Towers (HTWS) 106.60p 3.19%
Target Healthcare Reit Ltd (THRL) 78.50p 3.15%
Baltic Classifieds Group (BCG) 138.00p 3.14%
Essentra (ESNT) 234.50p 3.08%
Bridgepoint Group (Reg S) (BPT) 192.40p 2.94%
Hammerson (HMSO) 23.38p 2.90%

FTSE 250 - Fallers

Barr (A.G.) (BAG) 517.00p -4.44%
Currys (CURY) 54.45p -4.31%
Carnival (CCL) 587.00p -4.24%
Dechra Pharmaceuticals (DPH) 2,628.00p -3.81%
IntegraFin Holding (IHP) 293.80p -3.74%
National Express Group (NEX) 136.30p -3.54%
Darktrace (DARK) 269.40p -3.44%
888 Holdings (DI) (888) 84.30p -2.94%
Wizz Air Holdings (WIZZ) 2,051.00p -2.75%
Drax Group (DRX) 622.00p -2.58%