London close: Stocks finish weaker as caution prevails

The FTSE 100 ended the session down 0.09% at 7,567.07, and the FTSE 250 lost 0.05% to 21,787.46.

Sterling was meanwhile heading northwards, last trading up 0.15% on the dollar at $1.3556, and strengthening 0.35% against the euro to €1.1872.

“For a second day markets are enjoying a break from heavyweight data on the economic and corporate fronts,” said IG chief market analyst Chris Beauchamp.

“While BP earnings provided an initial bounce for the FTSE 100 that has faded throughout the day and a sense of caution prevails as the index returns to 7,600 and its January highs.

“Other indices continue to struggle, and if fears about a slowdown in growth gather pace then the FTSE 100 may end up moving back down to join other indices like the Dax rather than them playing catch-up with the UK index.”

On the economic front, a survey released earlier showed retail sales jumping last month, as shoppers sought out purchases ranging from watches to furniture.

According to the latest BRC-KPMG Retail Sales Monitor, total sales increased by 11.9% in January, compared to a 1.3% decline in January 2021, when the UK was in lockdown.

On a year-on-two-year basis, total retail sales grew by 7.5%, while on a like-for-like basis, sales increased 8.1% compared to January 2021, when they rose 7.1%.

The British Retail Consortium said household appliances, electronics and homeware had performed well, as had furniture.

Footwear and clothing, along with jewellery and watches, also performed strongly.

In comparison, food sales were muted, as restrictions brought in to tackle the spread of the Omicron variant were eased and people started eating out again.

In the three months to January, food sales decreased by 0.5% on a like-for-basis and by 0.1% on a total basis.

That was below the 12-month total average growth of 2.4%.

“It is encouraging to see such strong sales in January, even once inflation has been accounted for,” said Helen Dickinson, chief executive of the BRC.

“Furniture was the stand-out performance, after transport delays in the Christmas period began to ease.”

However, looking ahead she cautioned that retailers and consumers would face challenges in the coming months.

"Retailers face competition from other spending opportunities, as the public flood back to restaurants, cafes and live events.

“Furthermore, rising inflation - driven by higher costs of production, higher energy and transport prices as well as other looming price hikes - will mean consumers will have to tighten their purse strings.”

Ofgem, meanwhile, accepted it should have toughed up financial oversight of the energy market much earlier, a week after it announced household bills would spike by 54% this year.

The energy regulator’s chief executive Jonathan Brearley said it had been too focused on increasing competition in the retail energy market, rather than the financial resilience of smaller upstart suppliers.

Addressing the Business, Energy and Industrial Strategy Committee, Brearley told MPs that financial regulation "needs to be tougher", adding: "We need a retail sector that’s more resilient and more able to deal with financial shocks.

"To be clear, we accept that, had we done that sooner this would have been better for customers."

Wholesale gas and electricity prices have hit record highs over the last year, but the price cap prevented suppliers from passing on the increase in costs.

While the so-called 'big six' - British Gas, EDF, Eon, Npower, SSE and Scottish Power - were able to withstand the higher prices, 29 smaller suppliers, many with weak balance sheets or poor or no hedging strategies, have collapsed in recent months.

Across the pond, US small business confidence fell to an 11-month low in January, according to the National Federation of Independent Business, as ongoing worker shortages and increased prices for raw materials weighed on sentiment.

The NFIB's small business optimism index fell 1.8 points to 97.1 last month for its lowest reading since February 2021, with half of the 1,504 small businesses participating in the poll reportedly raising staff compensation - the highest reading for that particular metric in 48 years.

Roughly 27% of small businesses aim to increase compensation in the next three months, while 11% said labour costs were their top concerns. 28% bemoaned labour quality.

Back on London’s bourse, miners held onto their gains amid buoyant metal prices, with Antofagasta up 0.69%, Glencore rising 1.48%, Anglo American gaining 3.15%, and Rio Tinto 1.83% higher.

Housebuilder Bellway was ahead 2.47% after it reported a solid first-half trading performance and strong underlying demand.

On the downside, online supermarket and warehousing technology company Ocado tumbled 12.94%, after its annual loss grew as increased investment in its solutions business more than offset higher revenue.

SSE reversed earlier gains to close down 0.16%, even after it upgraded its full-year earnings expectations.

Oil giant BP closed down 2.36% despite swinging to a huge annual profit, driven by surging oil and gas prices, as it warned of lower production and flat refining margins in the first quarter of the current year.

Airtel Africa slid 8.58% after funds managed by Warburg Pincus and Morningstar Investment sold 58 million shares in the telecommunications group in a discounted placing.

DCC lost 2.57% even after it said third-quarter profit rose in line with expectations as the sales and marketing group's energy and healthcare businesses grew.

Micro Focus fell 10.85% after the software company said it was on track to deliver its 2023 financial year goals and posted a narrowing of its full-year losses, but a decline in revenues.

Travel company TUI was 1.77% weaker despite saying it expected pent-up demand to drive summer holiday bookings towards pre-pandemic levels, as it narrowed losses and planned to repay some of the German state aid it received during the crisis.

In broker note action, St. James's Place added 2.37% and M&G rose 1.37% after an upgrade to ‘overweight’ at Morgan Stanley.

Virgin Money UK jumped 4.38% after HSBC lifted its price target on the shares.

BAE Systems was lifted 1.6% by an initiation at ‘buy’ at Jefferies, while WH Smith was 0.15% higher despite a rating downgrade from Exane BNP Paribas.

Fellow retailer JD Sports Fashion was 1.3% weaker after an upgrade from Exane, and Marks and Spencer was knocked 1.24% lower after a rating downgrade from the same outfit.

Market Movers

FTSE 100 (UKX) 7,567.07 -0.08%
FTSE 250 (MCX) 21,787.46 -0.05%
techMARK (TASX) 4,385.68 -0.76%

FTSE 100 - Risers

Polymetal International (POLY) 1,085.50p 3.28%
Anglo American (AAL) 3,489.50p 3.15%
International Consolidated Airlines Group SA (CDI) (IAG) 166.14p 3.13%
InterContinental Hotels Group (IHG) 4,982.00p 2.40%
St James's Place (STJ) 1,554.00p 2.30%
BT Group (BT.A) 197.55p 2.28%
BAE Systems (BA.) 587.20p 1.87%
Rio Tinto (RIO) 5,617.00p 1.83%
Whitbread (WTB) 3,069.00p 1.76%
Persimmon (PSN) 2,440.00p 1.62%

FTSE 100 - Fallers

Ocado Group (OCDO) 1,225.00p -12.94%
Airtel Africa (AAF) 141.70p -8.58%
London Stock Exchange Group (LSEG) 6,976.00p -2.95%
Croda International (CRDA) 7,434.00p -2.72%
DCC (CDI) (DCC) 6,294.00p -2.57%
BP (BP.) 399.00p -2.36%
Sage Group (SGE) 694.60p -2.11%
Kingfisher (KGF) 307.10p -1.73%
Auto Trader Group (AUTO) 643.60p -1.59%
Experian (EXPN) 3,019.00p -1.57%

FTSE 250 - Risers

Carnival (CCL) 1,504.40p 6.02%
National Express Group (NEX) 264.60p 5.84%
Homeserve (HSV) 776.50p 3.88%
Virgin Money UK (VMUK) 202.60p 3.82%
easyJet (EZJ) 673.80p 3.73%
SSP Group (SSPG) 282.70p 3.48%
Petropavlovsk (POG) 15.01p 3.37%
Wizz Air Holdings (WIZZ) 4,340.00p 3.19%
Vistry Group (VTY) 1,061.00p 2.96%
Rank Group (RNK) 162.20p 2.66%

FTSE 250 - Fallers

Micro Focus International (MCRO) 407.50p -10.85%
Oxford Biomedica (OXB) 796.00p -4.10%
Liontrust Asset Management (LIO) 1,570.00p -3.68%
BMO Commercial Property Trust Limited (BCPT) 109.40p -3.36%
Elementis (ELM) 135.40p -3.29%
Kainos Group (KNOS) 1,525.00p -3.05%
Grainger (GRI) 286.80p -3.04%
Lancashire Holdings Limited (LRE) 527.50p -2.94%
Discoverie Group (DSCV) 841.00p -2.55%
UK Commercial Property Reit Limited (UKCM) 81.30p -2.52%