25th Apr 2014 09:47
LONDON (Alliance News) - UK stocks indices are trading in the red Friday as geopolitical concern weighs on sentiment ahead of a weekend likely to be full of heightened rhetoric over the situation in Ukraine. Meanwhile, the pound spiked to a session high against the dollar following the release of strong UK retail sales data.
By mid-morning the FTSE 100 is down 0.3% at 6,685.83, the FTSE 250 is down 0.3% at 15,951.67, and the AIM All-Share is down 0.4% at 821.20.
Stocks also are lower across Europe, with the French CAC 40 down 0.4%, and the German DAX 30 down 0.8%.
UK retail sales accelerated faster-than-expected in March, growing at 4.2%, up from 3.3% in February and exceeding economists expectations for growth of 3.8%. In the month of March alone, retail sales grew by 0.1%, lower than the 1.3% growth in February, but far better than the 0.4% contraction that had been expected.
The booming sales numbers follow recent inflation and wage growth data that suggests real wages are once again rising in the UK for the first time in three years.
"With wage growth finally rising above inflation the high street is now starting to see some of the benefit. These figures add weight to the belief that Britain is well on the road to a consumer-led economic recovery," said UFXMarkets managing director Dennis de Jong.
The pound has risen against the dollar following the data release, peaking at USD1.6830 so far Friday.
"With more people in jobs, wage growth returning and inflation coming down, the squeeze on real incomes has ended. Households need to dip less into their savings to spend, making the upturn more sustainable," said Berenberg senior economist Rob Wood.
The ratcheting up of tensions in eastern Ukraine that took the shine off of Thursday's equity market rally continues to hang over markets Friday. US Secretary of State John Kerry has used his firmest language yet to say that the sanctions already imposed on Russia are "only a preview of how the world will respond if Russia continues to escalate what they had promised to de-escalate."
Russia had its credit rating downgraded to BBB- from BBB by ratings agency Standard & Poor's Friday, in a sign that the conflict is taking its toll on business sentiment. The Russian Central Bank also has just raised interest rates to 7.5% from 7.0%.
Within UK equities, Tullow Oil leads the FTSE 100 fallers, down 2.6% after announcing that its Tependar-1 exploration well will be plugged and abandoned as the mining group failed to encounter hydrocarbons there.
At the other end of the leading index, Pearson is up 2.8% after announcing a "solid start" to 2014 and maintaining its full-year earnings guidance. "Our major programme of restructuring and investment is on-track and will drive a leaner, more cash generative, faster growing business from 2015," said Chief Executive John Fallon in a statement.
William Hill is up 2.6% despite announcing a fall in profits and the closure of 109 betting shops before the end of the year. The bookmaker made clear that the decision to close shops was in response the the governments decision to increase the tax rate on high-speed gambling machines to 25% from 20% from next year.
Investors have been wary of bookmakers recently amid a heightened regulatory environment, but have responded positively to the cost cutting announced by William Hill Friday. Numis Securities analyst Ivor Jones is positive on the stock, suggesting that the concern over regulation risk is at its peak. "If life is tough for William Hill, it is a lot tougher for its smaller and less well-financed competitors," says Jones.
Still to come in the data calendar Friday, the US Markit services PMI for April at 1345 GMT, followed by the Reuters/Michigan consumer sentiment index at 1355 GMT, with economists expecting a slight improvement in both.
It is a slightly quieter day in the US corporate calendar, but results are expected from big names including Ford Motor Co and State Street Corp. US futures currently indicate a slightly softer open on Wall Street.
By Jon Darby; [email protected]; @jondarby100
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