London midday: Stocks push higher as housebuilders gain but airlines slump

The FTSE 100 was up 1.2% to 6,915.22, while the pound was down 0.3% against the dollar at 1.2950 and 0.5% weaker versus the euro at 1.1345.

On the Brexit front, a one-page document published by the Daily Telegraph detailed the logistics of a second Brexit referendum and suggested that another vote would take well over a year to organise.

Brexit aside, sentiment was underpinned by news that the US might consider easing some trade tariffs against China.

According to the Wall Street Journal, US Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports and suggested offering a tariff rollback during trade discussions scheduled for 30 January.

However, the Treasury later denied that Mnuchin had made any such recommendation, while US Trade Representative Robert Lighthizer was said to have resisted the idea.

Meanwhile, data from the Office for National Statistics showed that UK retail sales weakened much more than expected at the end of last year.

December retail sales excluding fuel fell 1.3% month-on-month, which was worse than the 0.8% decline predicted by economists. Compared to December last year, sales were up 2.6%, versus the average forecast of 3.8%.

A sharp 2.3% monthly decline in sales for non-food shops was the key element to December's slide, driven by lower household goods sales.

November's growth was also revised down by the ONS, with the monthly rate cut to 1% from 1.2% and the year-on-year trimmed to 3.5% from 3.8%.

Averaging out growth for November and December to reduce the volatility associated with Black Friday and Christmas, sales grew by 0.3% on the month, in line with the average for 2018 as a whole. Quarter-on-quarter, growth was down 0.2%.

Sam Tombs at Pantheon Macroeconomics noted that for the past four years, every estimate of monthly growth in November has been revised down over time, while every December estimate has later been revised up.

He said December's decline largely reflects the seasonal adjustment process failing to update fully for the new pattern of spending generated by Black Friday, which has dragged more pre-Christmas shopping forward to November.

Looking past the volatility in the numbers, Tombs said it was "clear that retailers have had a tough start to the year", with quarter-on-quarter sales volumes down 0.2%. "That drop is not unprecedented - volumes fell by 0.3% in Q1- and it follows two quarters of strong growth, but it nonetheless suggests that consumers have tightened their purse strings amid rising concerns about Brexit."

Broadcaster ITV was the standout gainer as it rebounded from heavy losses in the previous session on the back of a downgrade by Bank of America Merrill Lynch.

Housebuilders were also on the rise following a weak session on Thursday after the latest RICS survey painted a bleak picture of the outlook for the housing market, with Barratt Developments, Persimmon and Taylor Wimpey all higher.

On the downside, airlines were under the cosh after a profit warning from Ryanair, with EasyJet, British Airways owner International Consolidated Airlines Group and Wizz Air all under pressure. Ryanair was weaker as the budget airline cut its full-year profit guidance to between €1bn and from between €1.1bn and €1.2bn, pinning the blame on lower air fares and saying that it couldn't rule out further cuts to air fares and/or slightly lower full-year guidance.

Neil Wilson, chief market analyst at Markets.com, said: "The fundamental problem of overcapacity in the European short haul sector remains and will yet take time to ease. Norwegian's closing of bases across southern Europe is a positive but there is yet more consolidation required.

"Indeed, even as demand pressures relent it is true that the sector as a whole is very adept at competing away any margin growth through lower fares. On top of this we can add a good dose of Brexit uncertainty into mix to suggest that this is a very uncertain period for airlines, albeit the largest carriers such as Ryanair, EasyJet and IAG are set to win out from sector-wide consolidation."

Elsewhere, cloud-enabled security software provider Sophos tumbled 20% after a nine-month trading update in which it said it expects to see a modest decline in full-year constant current billings.

On the broker note front, EasyJet was cut to 'neutral' at JPMorgan Cazenove, while Antofagasta was trading up despite a downgrade to 'sell' at Goldman Sachs.

Coats was initiated at 'equalweight' at Barclays and RWS Holdings was started at 'overweight'.

Market Movers

FTSE 100 (UKX) 6,915.22 1.17%
FTSE 250 (MCX) 18,667.16 0.70%
techMARK (TASX) 3,374.55 0.80%

FTSE 100 - Risers

ITV (ITV) 133.81p 3.65%
Barratt Developments (BDEV) 535.00p 3.56%
Persimmon (PSN) 2,396.00p 3.50%
Taylor Wimpey (TW.) 166.55p 2.81%
Standard Chartered (STAN) 618.90p 2.64%
Ashtead Group (AHT) 1,915.50p 2.49%
Rolls-Royce Holdings (RR.) 885.20p 2.45%
Prudential (PRU) 1,483.00p 2.35%
Standard Life Aberdeen (SLA) 268.55p 2.34%
Legal & General Group (LGEN) 256.80p 2.31%

FTSE 100 - Fallers

easyJet (EZJ) 1,141.00p -2.40%
Ocado Group (OCDO) 888.20p -1.33%
International Consolidated Airlines Group SA (CDI) (IAG) 610.60p -0.84%
Micro Focus International (MCRO) 1,481.00p -0.84%
Mondi (MNDI) 1,791.50p -0.80%
Fresnillo (FRES) 894.40p -0.71%
NMC Health (NMC) 2,730.00p -0.15%
Vodafone Group (VOD) 148.18p -0.09%
British American Tobacco (BATS) 2,510.50p -0.08%
Bunzl (BNZL) 2,413.00p 0.04%

FTSE 250 - Risers

Entertainment One Limited (ETO) 391.80p 6.35%
CYBG (CYBG) 197.60p 6.07%
Greencoat UK Wind (UKW) 135.20p 4.48%
Metro Bank (MTRO) 2,162.00p 4.24%
Playtech (PTEC) 421.20p 3.87%
Premier Oil (PMO) 72.35p 3.51%
Galliford Try (GFRD) 734.47p 3.30%
Dixons Carphone (DC.) 134.90p 3.06%
Hochschild Mining (HOC) 166.75p 3.00%
Grafton Group Units (GFTU) 761.50p 2.91%

FTSE 250 - Fallers

Sophos Group (SOPH) 288.60p -23.37%
Ted Baker (TED) 1,836.40p -3.14%
Acacia Mining (ACA) 181.85p -2.20%
RPC Group (RPC) 702.00p -1.98%
Capita (CPI) 117.33p -1.90%
Dechra Pharmaceuticals (DPH) 2,398.00p -1.88%
Mediclinic International (MDC) 325.90p -1.57%
F&C Commercial Property Trust Ltd. (FCPT) 128.60p -1.38%
Avast (AVST) 284.90p -1.28%
TBC Bank Group (TBCG) 1,466.00p -1.21%