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LONDON MARKET MIDDAY: Retailers hit by slump in UK sales

18th Aug 2023 11:51

(Alliance News) - Stock prices in London were lower at midday Friday, as UK retailers were hit by worse than expected sales in July.

The FTSE 100 index was down 58.71 points, 0.8%, at 7,251.50. The FTSE 250 was down 217.79 points, 1.2%, at 18,138.28, and the AIM All-Share was down 6.75 points, 0.9%, at 733.37.

The Cboe UK 100 was down 0.8% at 722.95, the Cboe UK 250 was down 1.2% at 15,919.37, and the Cboe Small Companies was down 0.1% at 13,580.52.

UK retail sales were worse than expected last month, according to official data on Friday, as consumers contended with wet weather and the intensifying cost-of-living crisis.

The Office for National Statistics said retail sales fell 3.2% annually in July, compared to a downwardly-revised 1.6% fall in June. The market had been expecting a 2.1% fall for July, according to FXStreet-cited consensus.

June's annual decline was first estimated at 1.0%.

From the previous month, sales fell 1.2% in July, compared to a downwardly-revised 0.6% rise in June. July's reading was worse than market consensus, which had forecast a 0.5% decline.

Danni Hewson, head of financial analysis at AJ Bell, said: "Slowing retail sales would normally be seen as a sign of consumer stress, but this feels more like a weather related blip and it's unlikely the Bank of England will give these numbers anything more than a cursory glance when it comes to next month's interest rate decision."

Helen Dickinson, chief executive of the British Retail Consortium, seemed hopeful for the coming months. Dickinson noted that the women's football World Cup final this weekend, as well as back-to-school shopping and university students readying themselves for the new academic year, should boost spending.

"Nonetheless, the economic backdrop will remain difficult, and the government must find ways to create an environment that fosters economic growth," she warned.

On the back of the readings, UK retailers were under pressure.

In the FTSE 100, Frasers was down 2.2%, JD Sports down 2.0%, Kingfisher down 1.8%, and Associated British Foods down 1.3%.

Among London's small-caps, Superdry shed 5.7%, Card Factory lost 5.0%, and Asos was down 4.0%.

Elsewhere in the FTSE 100, RS Group shed 3.7%. It was the worst performer of the morning, with UBS cutting it to 'neutral' from 'buy'.

In the FTSE 250, TI Fluid Systems was down 4.4%.

The Oxfordshire-based maker of automotive fluid storage, carrying, delivery, and thermal management systems for light vehicles said its Executive Vice President Stefan Rau has sold shares worth GBP77,785 in total.

Bank of Georgia was down 7.8%, giving up some of Thursday's gains. It had closed up 14% on Thursday.

The Tbilisi-based lender said profit in the first half of 2023 jumped 38% to GEL709.9 million, about GBP215.3 million, from GEL516.1 million a year before. Profit before income tax expense and one-off items rose by 41% to GEL807.5 million from GEL573.7 million.

In European equities on Friday, the CAC 40 in Paris was down 0.7%, while the DAX 40 in Frankfurt was down 0.5%.

Eurozone inflation slowed in July, Eurostat confirmed on Friday, following confirmation earlier in the week that the single currency area had returned to growth in the second quarter of 2023.

The consumer price index rose by 5.3% in July from a year before, confirming the flash estimate released by Eurostat at the end of July and easing from a 5.5% rise in June. The eurozone inflation rate faded markedly from 8.9% in July 2022.

On a monthly basis, consumer prices fell by 0.1% in July. They had increased 0.3% in June from May.

The confirmation of slowing inflation followed a preliminary estimate of economic growth on Wednesday, also from Eurostat.

The estimate showed that seasonally adjusted gross domestic product increased by 0.3% in the eurozone in the second quarter of 2023, compared to the first quarter. In the first quarter of 2023, GDP had fallen by 0.1% from the fourth quarter of 2022.

The pound was quoted at USD1.2735 at midday on Friday in London, down compared to USD1.2746 at the equities close on Thursday. The euro stood at USD1.0873, virtually unchanged against USD1.0872. Against the yen, the dollar was trading at JPY145.50, lower compared to JPY146.06.

Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 index down 0.2%, and the Nasdaq Composite down 0.3%.

Brent oil was quoted at USD83.93 a barrel at midday in London on Friday, down from USD84.68 late Thursday. Gold was quoted at USD1,894.89 an ounce, lower against USD1,893.44.

Still to come in Friday's economic calendar, there is a Canada's PPI reading at 1330 BST.

By Sophie Rose, Alliance News reporter

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