21st Feb 2025 12:05
(Alliance News) - London's FTSE 100 held modest gains around midday Friday, with strong retail sales figures providing some impetus, although mixed borrowing data could provide another headache for Chancellor Rachel Reeves.
The FTSE 100 index rose 9.70 points, 0.1%, at 8,672.67. The FTSE 250 jumped 170.56 points, 0.8%, at 20,783.33, and the AIM All-Share climbed 4.17 points, 0.6%, at 720.71.
The Cboe UK 100 rose 0.2% to 868.82, the Cboe UK 250 advanced 0.9% to 18,084.36, while the Cboe Small Companies declined 1.0% at 15,733.43.
The more upbeat mood spread to Europe, where the CAC 40 in Paris is up 0.6% and Frankfurt's DAX 40 is up 0.3%.
On Sunday, Germany heads to the polls. Emmanuel Cau at Barclays said the election will be a "decisive moment for Europe".
"Growth is anaemic, EU integration is struggling and transatlantic alliance is threatened. Given the centre-right CDU/CSU's comfortable lead in the polls, markets may be anticipating a more pro-growth government. But polls show high fragmentation, and optimism could be scuppered if a one-third blocking majority is achieved by AfD and minor parties," Cau wrote.
In New York, markets are seen little changed when trading starts on Friday. The Dow Jones Industrial Average and Nasdaq Composite are called up by 0.1%, while the S&P 500 is seen flat.
On the FTSE 100, retailers advanced after retail sales topped expectations at the start of the year, according to numbers from the Office for National Statistics.
Retail sales volumes surged by 1.7% in January from December, well ahead of the FXStreet cited consensus of 0.3%. In December, retail sales had fallen 0.6%, the reading downwardly revised from 0.3%.
The ONS said: "Food store sales volumes grew strongly in January 2025, following falls in recent months."
JD Sports Fashion led the way, up 2.7%, while Primark owner AB Foods gained 1.9% and grocer J Sainsbury firmed 1.9%.
A further boost to consumer stocks came from a slight uptick in consumer confidence, according to research carried out by GfK.
GfK's UK consumer confidence index remained in negative territory but edged up to minus 20 in February from minus 22 in January. No change from the previous month was expected according to FXStreet-cited consensus.
Simon French at Panmure Liberum called the retail sales and consumer confidence data "encouraging".
"It is an encouraging start to [the first quarter of 2025] and given fears of a soft quarter in the run up to the [national insurance contributions] increase this perhaps draws a line under some of the most bearish fears."
Data elsewhere was a mixed bag.
A report from S&P Global showed UK service sector growth accelerated at a faster pace than expected in February, though the manufacturing economy remained in the doldrums.
The UK S&P Global flash services purchasing managers' index rose to 51.1 points in February, from January's final tally of 50.8. It landed above an FXStreet-cited forecast of 51.1 points.
However, the manufacturing economy struggled. The flash manufacturing PMI fell to a 14-month low of 46.4 points, from January's final reading of 48.3 points. The reading was below consensus of 46.4, according to FXStreet.
The upshot of the readings was a composite PMI that was largely unchanged. The composite PMI slipped fractionally to a two-month low of 50.5 in February, from January's final reading of 50.6. The February flash was in line with consensus.
Meanwhile, data from the ONS showed there was a public sector net borrowing surplus of GBP15.44 billion in January, thanks largely to self-assessed tax returns.
The record figure is more than the surplus seen a year ago of GBP14.69 billion, and the largest since monthly records began in 1993.
However, it fell short of the earlier GBP20 billion surplus forecast by the Office for Budget Responsibility.
Elliott Jordan-Doak at Pantheon Macroeconomics said the data piles the pressure on the chancellor, and he thinks "it will only get worse from here".
"The pressure on the public finances is seemingly relentless," he said.
"January is an important month for Government revenues, as self-assessed income tax returns flood into the exchequer, so today's figures are potentially a major disappointment, undermining the chancellor's headroom against her fiscal rules. That said, self-assessed tax receipts can be subject to large revision, and their timing can vary markedly from year-to-year. We will have to wait until the February data, when we see late filings flow in too, before we can be sure. But as it stands today, the chancellor has a bigger job of work to do next month to rectify the fiscal situation," he added.
Panmure Liberum's French agreed that February's figures would give a fuller picture. He added that the impact of the Barclays outage on January 31 on last-minute tax returns is also uncertain.
Amid the data barrage, bond yields held steady. The yield on the UK 10-year gilt held around 4.60%, down 2 basis points on the day.
Against the dollar, the pound strengthened to USD1.2650 midday Friday, from USD1.2638 at the time of the London equities close on Thursday. The euro rose slightly to USD1.0473 from USD1.0470. Against the yen, the dollar rose to JPY150.20 from JPY149.64.
Standard Chartered rose 3.1% after the bank made positive noises about 2025 alongside strong, if "messy" fourth-quarter results.
The London-listed Asia-focused bank left guidance unchanged, but said its strategy was "firing on all cylinders", and it was pushing for "every bit of upside it can".
The FTSE 100 listing said it is currently tracking towards the "upper end of the range" of operating income guidance for compound annual growth of 5% to 7% in 2025 and 2026. It sees the return on tangible equity approaching 13% in 2026 and to progress thereafter.
But Chief Executive Bill Winters told investors on an earnings call that while "we're not changing our guidance," the bank is "going to push for every bit of upside that we can".
In the fourth quarter, pretax profit declined 30% to USD800 million from USD1.14 billion the year before, lower than the USD983 million market consensus. Adjusted pretax profit was USD1.05 billion, down slightly from USD1.06 billion.
Fourth-quarter underlying operating income rose 20% to USD4.83 billion from USD4.02 billion, higher than the expected USD4.56 billion. Within this, underlying net interest income rose 20% to USD2.86 billion, and non-NII rose 21% to USD1.97 billion.
Citi banking analyst Andrew Coombs pointed out the fourth quarter adjusted pretax profit miss was entirely driven by a USD342 million software asset write-off. Excluding this, underlying pretax profit would have been 27% ahead, with revenue 9% ahead, net interest income 12% ahead, non-NII 4% ahead, operating expenditure 6% worse, and loan impairments 47% better.
"On balance a slightly messy set of results, but we think this should be taken well," Coombs added.
Elsewhere, Poolbeg Pharma plunged 17% after potential suitor Hookipa Pharma opted against making a bid for the company.
The London-based clinical-stage biopharmaceutical said it was "surprised and disappointed" by the decision.
An ounce of gold fell to USD2,930.00 early Friday afternoon, from USD2,948.66 at the time of the closing bell in London on Thursday. A barrel of Brent faded to USD75.69 from USD76.31.
Still to come on Friday, US existing home sales figures and a flash composite PMI report.
By Jeremy Cutler, Alliance News reporter
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