17th Mar 2025 16:59
(Alliance News) - The FTSE 100 extended its winning run to four despite soft US retail sales figures and warnings of lower domestic economic growth than expected.
The FTSE 100 index closed up 47.96 points, 0.6%, at 8,680.29. The FTSE 250 ended up 32.32 points, 0.2%, at 20,027.91, and the AIM All-Share closed up 1.22 points, 0.2%, at 688.96.
The Cboe UK 100 ended up 0.6% at 867.52, the Cboe UK 250 closed flat at 17,426.68, and the Cboe Small Companies ended up 0.3% at 15,608.13.
In European equities on Monday, the CAC 40 in Paris ended up 0.6% and the DAX 40 in Frankfurt closed up 0.7%
Market focus this week will be on a slew of central banking decisions, with the Federal Reserve, Bank of England, Bank of Japan and Swiss National Bank among those announcing interest rate calls.
The Bank of England's decision on Thursday comes as economic projections for the UK were lowered.
The OECD trimmed its UK GDP growth estimate for 2025 to 1.4% from 1.7%. It expects UK growth will then slow to 1.2% in 2026, down from 1.3% before.
The downgrade comes ahead of Chancellor Rachel Reeves Spring Statement on March 26, when official forecasts are expected to show an even weaker GDP outlook.
On Thursday, Barclays expects the Monetary Policy Committee to hold bank rate at 4.5%, before a cut in May.
Stocks in New York were mixed at the London equities close, with the DJIA up 0.5%, the S&P 500 index up 0.1%, but the Nasdaq Composite down 0.5%.
US retail sales edged up in February, recovering slightly from a decline in January.
US advance monthly retail and food services sales rose 0.2% in February to USD722.7 billion from USD721.3 billion in January. February's 0.2% sales increase fell short of the FXStreet-cited market consensus of a 0.7% rise.
Revised data also showed that January's retail sales decline was steeper than previously estimated, with a revised fall of 1.2% from an initial estimate of 0.9%.
Barclays noted February's "underwhelming" headline conceals a sharp rebound in the control group, which rose 1.0% month-on-month, beating the 0.3% consensus, and unwinding a downwardly revised decline of the same magnitude in January.
Capital Economics analyst Stephen Brown felt the rebound in control group sales – which feeds into the BEA's consumption estimate – is "something of a relief after the collapse in the University of Michigan consumer sentiment index revealed last week. Consumer spending is on track to slow sharply this quarter, but not by as much as we previously feared."
But Wells Fargo said the gain in control group sales "offers little consolation" as it mirrors a decline of the same magnitude in January.
"The key thing to understand in today's report is that last month's sales figures were revised sharply lower resulting in what turns out to be the worst month for retail sales since 2021. The 0.2% increase in headline retail sales for February was just a third of the 0.6% increase that had been expected. The fact that this modest bounce comes on the heels of the downward revision makes it all the more disappointing," Wells Fargo said.
The data saw the dollar fall further against European currencies, although it held firm against the yen.
The pound was quoted higher at USD1.2987 at the London equities close Monday, compared to USD1.2920 at the close on Friday. The euro stood at USD1.0922 against USD1.0879. Against the yen, the dollar was trading higher at JPY148.57 compared to JPY148.34 late Friday.
Back in London, Phoenix Group shares advanced 9.5%. It hailed a strong 2024 performance and "good progress" in the execution of a three-year strategy.
Chief Executive Officer Andy Briggs said: "We are ahead of plan from both a strategic and financial perspective, delivering operating cash generation of GBP1.4 billion two years ahead of our 2026 target. We continue to operate in the top half of our shareholder capital coverage ratio range and our strong cash generation has enabled us to repay debt whilst also investing in our business.
"Our strong performance in 2024 and the operating momentum we have built will support us in delivering our growth strategy and have led us to upgrade our cash generation and adjusted operating profit targets through to 2026. Delivery will give us the financial flexibility to reduce our leverage, while also sustaining our progressive dividend for shareholders."
Phoenix now expects operating cash generation to grow by a "mid-single digit percentage" per year going forward, after it achieved its 2026 target ahead of schedule.
Bank of America felt Phoenix addressed several of the concerns "plaguing" the stock.
"Most importantly, it will organically grow shareholders' equity from 2026 (benefitting from raised operating profit guidance) and has reiterated its progressive dividend policy. Cash generation beat expectations and guidance has been raised. Solvency is comfortable and debt leverage will reduce," it added.
Tesco and Sainsbury fell 4.1% and 1.5% on further consideration of the threat from Asda's price-cutting plans.
On Friday, the UK's two leading food retailers saw share prices tumble 8.7% and 7.8% respectively after Asda launched a turnaround plan which includes a "substantive and well-backed programme of investment in price, availability".
Analysts highlighted the threat to food retail margins and profits from a price war but stressed much depends on the success of Asda's revival.
"We do not take a complacent stance but neither, we sense, will the listed players. Irrational contagion lowering gross margin and earnings is the greatest concern, but we need to remember too that the listed players are better grocers than Asda with a broader customer set, stronger balance sheets, and a will to remain competitive too," Clive Black, retail analyst at Shore Capital said.
Qinetiq was the worst FTSE 250 performer, slumping 19%. It said tough trading conditions continued in its fourth-quarter, but it believes its long-term future is promising.
The defence technology firm said there were "further delays to a number of contract awards".
"In addition, recent geopolitical uncertainty has impacted our usual fourth quarter weighting to higher margin product sales from the US," it cautioned.
QinetiQ expects organic revenue growth for the financial year ending March to be around 2% at an underlying margin of 10%, including GBP25 to GBP30 million of one-off in-year charges.
In January, the firm said it expected high single digit organic revenue growth for the full-year.
In the year to March 2024, QinetiQ reported organic sales growth of 14%.
Among the best performers on AIM, CVS Group added 8.6%. RBC raised the veterinary services provider to 'outperform' from 'sector perform'.
Brent oil was quoted higher at USD71.04 a barrel at the London equities close Monday from USD70.32 late Friday. Gold was quoted higher at USD2,995.90 an ounce against USD2,988.54.
Tuesday's UK corporate calendar has half-year results from Close Brothers and full-year results from Computacenter.
The economic calendar for Tuesday has Canadian CPI at 1330 GMT, eurozone trade figures at 1000 GMT and US Industrial production data at 1315 GMT.
By Jeremy Cutler, Alliance News reporter
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Phoenix Group HoldingsQinetiqSainsbury'sTescoCVS Group