London stocks managed to break back above the waterline by the close on Friday, even after investors were faced with disappointing UK retail sales data.
The FTSE 100 ended the session up 0.41% to 7,087.90, and the FTSE 250 was ahead 0.61% at 23,750.89.
Sterling was weaker, meanwhile, last trading 0.13% lower on the dollar at $1.3621, and losing 0.3% against the euro to change hands at €1.1646.
“Having opened lower this morning, European markets have recovered as we head into the weekend, but we can’t ignore the fact that this week has seen a bit of a shift in sentiment when it comes to optimism about the overall recovery story,” said CMC Markets chief market analyst Michael Hewson.
“Some sectors have taken a bit more punishment than most this week, notably luxury stocks, as well as basic resources over concerns that the combined headwinds of rising delta infections, supply chain constraints and a self-induced slowdown in China means that we’ve probably seen the peak of the recovery, just over a week since we were posting record highs.
“The FTSE 100 is having a slightly better end to the week, but is still set to post its first week loss in over a month.”
On the data front, UK retail sales unexpectedly fell in July as people spent less on groceries and more on going out and as the boost from the Euros faded.
According to figures released by the Office for National Statistics (ONS), retail sales declined 2.5% on the month versus expectations for a 0.4% increase, although they were still up 5.8% compared with their pre-pandemic levels in February 2020.
Food store sales were down 1.5% following an increase in June, when sales were boosted by the start of the Euro 2020 football championship.
Non-food stores, meanwhile, reported a 4.4% drop in sales volumes compared with June.
“Following the Euro 2020-related boost in June, retail sales fell in July to their lowest level since shops re-opened in April, but still remain well above pre-pandemic levels,” said Jonathan Athow, deputy national statistician at the ONS.
“Food sales fell back as further lifting of hospitality restrictions meant consumers had more opportunities to spend outside retail.
“Heavy rainfall at the start of July hit fuel sales, which dipped for the first time since February.”
ING economist James Smith added that July’s fall in UK retail sales could not convincingly be put down to the rapid spread of the ‘Delta’ variant of Covid-19.
“Social spending is a better place to look for that impact, and so far it appears smaller than might have been expected,” he said.
“Instead, retail’s latest fall may be down to a rebalancing towards services after lockdowns.”
The ONS also revealed that public sector borrowing continued to slow last month, undershooting forecasts by a wide margin, but still near record highs.
Net borrowing, excluding banks, reached £10.4bn in July, against consensus forecasts for £11.9bn – £10.1bn less than in the same month a year ago, but the second-highest amount of borrowing since record began in 1993.
Central government receipts improved by £9.5bn from a year earlier to reach £70.0bn, while spending shrank by £2.9bn to £79.8bn.
In equity markets, Marks & Spencer racked up gains of 14.09% after saying it expected annual profits to be at the top end of expectations as it reported a sharp rise in revenues during the summer.
Assuming no further Covid-related restrictions on trading, M&S forecast adjusted profit before tax for the year to be above the upper end of previous guidance of £300m to £350m.
Group revenue surged 29.1% in the 19 weeks to 14 August, and was 4.4% higher than 2019 before the Covid-19 pandemic struck and forced the closure of the retailer’s stores.
Other retailers also rose, with Next up 1.38%, JD Sports Fashion rising 2.87%, and B&M in the black by 2.27%.
Wm Morrison shares rallied 4.23% after it agreed a £7bn takeover by US private equity firm Clayton, Dubilier & Rice.
A consortium led by Fortress Group said it was “considering its options” after its own takeover offer was trumped by CD&R.
Tesco and J Sainsbury were also on the front foot, by 1.02% and 1.9%, respectively.
Babcock International jumped 2.98% after an upgrade to ‘overweight’ from ‘equalweight’ at Morgan Stanley, which said the shares offer “significant value”.
On the downside, British Airways owner IAG descended 0.56%, amid ongoing concerns about the impact of the Delta variant on travel.
Market Movers
FTSE 100 (UKX) 7,087.90 0.41%
FTSE 250 (MCX) 23,750.89 0.61%
techMARK (TASX) 4,834.39 0.61%
FTSE 100 – Risers
JD Sports Fashion (JD.) 999.80p 2.87%
Imperial Brands (IMB) 1,561.00p 2.50%
B&M European Value Retail S.A. (DI) (BME) 566.80p 2.27%
Intermediate Capital Group (ICP) 2,178.00p 2.01%
Sainsbury (J) (SBRY) 294.00p 1.90%
Spirax-Sarco Engineering (SPX) 15,860.00p 1.88%
Ocado Group (OCDO) 1,922.50p 1.58%
British American Tobacco (BATS) 2,711.50p 1.55%
Kingfisher (KGF) 360.00p 1.49%
Next (NXT) 7,916.00p 1.38%
FTSE 100 – Fallers
Anglo American (AAL) 2,867.00p -1.49%
Phoenix Group Holdings (PHNX) 624.00p -1.36%
Diageo (DGE) 3,518.50p -1.23%
Pershing Square Holdings Ltd NPV (PSH) 2,540.00p -0.97%
Rolls-Royce Holdings (RR.) 110.16p -0.95%
Ashtead Group (AHT) 5,490.00p -0.90%
Auto Trader Group (AUTO) 635.20p -0.78%
Weir Group (WEIR) 1,623.00p -0.70%
Smith (DS) (SMDS) 439.70p -0.68%
Hargreaves Lansdown (HL.) 1,471.00p -0.67%
FTSE 250 – Risers
Marks & Spencer Group (MKS) 162.80p 14.09%
Morrison (Wm) Supermarkets (MRW) 291.00p 4.23%
Watches of Switzerland Group (WOSG) 1,012.00p 3.90%
Premier Foods (PFD) 113.00p 3.67%
Elementis (ELM) 147.90p 3.28%
Genuit Group (GEN) 727.00p 3.11%
LXI Reit (LXI) 147.80p 3.07%
Babcock International Group (BAB) 355.60p 2.98%
Plus500 Ltd (DI) (PLUS) 1,527.00p 2.91%
Hammerson (HMSO) 33.49p 2.82%
FTSE 250 – Fallers
Trainline (TRN) 340.80p -4.59%
Wood Group (John) (WG.) 226.50p -3.33%
Wizz Air Holdings (WIZZ) 4,857.00p -2.92%
Rank Group (RNK) 170.00p -2.86%
Ferrexpo (FXPO) 355.40p -2.59%
Restaurant Group (RTN) 117.20p -2.49%
Marshalls (MSLH) 767.00p -2.48%
Avon Protection (AVON) 1,900.00p -2.36%
Contour Global (GLO) 195.00p -2.11%
Hochschild Mining (HOC) 145.40p -2.02%
