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London midday: Retailers lead equity gains as pound slips back on wage data

By Michele Maatouk

Date: Tuesday 17 Apr 2018

London midday: Retailers lead equity gains as pound slips back on wage data

(ShareCast News) - London stocks were higher by midday on Tuesday as the pound slipped back following the latest wage growth figures for the UK.
The FTSE 100 was up 0.3% to 7,218.23, having opened flat, as the pound lost 0.1% against the dollar and the euro to 1.4322 and 1.1576 respectively after the release of UK jobs data. This came a day after sterling had hit its strongest level since the Brexit vote.

A weaker pound tends to boost the top-flight index as around 70% of its constituents derive most of their earnings from overseas.

Wage growth numbers released earlier rose above inflation for the first time in 13 months, giving the Bank of England more confidence about raising interest rates in May.

However, UK average weekly earnings rose 2.8% in the three months to February compared to the same period last year, which was unmoved from growth figures a month earlier but short of the 3.0% expected by economists, resulting in the hit to the pound.

Excluding bonuses, average weekly earnings growth improved to 2.8% from 2.6% a month ago, as the Bank of England forecast for the first half of 2018 and economists had expected.

Both measures overtook consumer price inflation, which came in at 2.7% for February, as unemployment was also confirmed as having fallen back to 4.2%, its joint-lowest level since 1975.

With 32.26m people in work during the three months to February, the employment rate rose to 75.4%, which is the highest since comparable records began in 1971.

More recent data on the claimant count rate showed this remained at 2.4% in March, with a 11.6K increase in jobless claims compared to the revised 15.1K from the month before.

"From a Bank of England perspective, the fall in the jobless rate strengthens the case of those who believe the economy is running with too little spare capacity and the fact that wage growth is now also marginally ahead of the inflation rate will also be used as an argument for a May rate hike," says Peter Dixon, senior economist at Commerzbank.

But he said with first-quarter UK GDP figures next week looking likely to turn out quite weak, "we would need to see signs of a rebound in subsequent quarters in order that the BoE can deliver a second rate hike before year-end".

On the corporate front, retailers were prominent at the top of the leaderboard as the improving wage outlook provides a potential boon to the squeezed UK consumer.

Next, Tesco and Marks & Spencer were among the top risers and Primark owner Associated British Foods also rallied after it left its annual outlook unchanged as falling profit at the company's sugar business offset the strength at its clothing chain to result in a 1% decline in first-half profit.

Russian steelmaker Evraz was the standout gainer on the FTSE 100 amid relief that US President Trump has not imposed additional sanctions on Russia - for now. Oil prices were also holding steady, with Brent at $71.53 a barrel and BP, Shell and others in positive territory.

Melrose Industries gained as its takeover of GKN will be declared wholly unconditional later this week after the turnaround specialist received acceptances over more than 81% of the engineer's shares.

Specialist emerging markets asset manager Ashmore Group racked up strong gains after posting a 10% rise in third-quarter assets under management as net inflows were at their best level since June 2013.

JD Sports surged after the retailer posted a 24% jump in full-year profit as sales grew and the company's international expansion paid off.

Roadside assistance and breakdown cover provider AA was sharply higher as its full-year adjusted earnings per share beat forecasts.

InterContinental Hotels ticked up as it restated its results for the last two years and said revenue for 2017 has more than doubled, while Tate & Lyle edged higher after announcing the appointment of Mondelez's Imran Nawaz as its new chief financial officer, with effect from 1 August.

On the downside, Intu Properties fell despite hailing a "strong" first quarter with a record level of retailer demand, as it made no mention of its deal with Hammerson, which hangs in the balance after it emerged last week that the housebuilder's largest shareholder is planning on voting against it.

Reckitt Benckiser was hit by a downgrade to 'underperform' at Credit Suisse.

Market Movers

FTSE 100 (UKX) 7,218.23 0.28%
FTSE 250 (MCX) 19,819.75 0.24%
techMARK (TASX) 3,347.98 -0.05%

FTSE 100 - Risers

Evraz (EVR) 386.50p 5.83%
Associated British Foods (ABF) 2,687.00p 4.03%
GKN (GKN) 462.73p 2.76%
Mediclinic International (MDC) 605.40p 2.16%
Next (NXT) 5,160.00p 1.90%
Tesco (TSCO) 238.00p 1.84%
Standard Life Aberdeen (SLA) 379.50p 1.80%
Marks & Spencer Group (MKS) 281.00p 1.66%
Centrica (CNA) 142.70p 1.57%
G4S (GFS) 253.90p 1.28%

FTSE 100 - Fallers

Reckitt Benckiser Group (RB.) 5,798.00p -3.32%
Rolls-Royce Holdings (RR.) 857.00p -2.37%
British American Tobacco (BATS) 4,005.50p -0.93%
London Stock Exchange Group (LSE) 4,182.00p -0.81%
Smurfit Kappa Group (SKG) 3,048.00p -0.78%
Rentokil Initial (RTO) 270.00p -0.70%
Burberry Group (BRBY) 1,713.00p -0.61%
Whitbread (WTB) 4,194.00p -0.57%
Just Eat (JE.) 717.60p -0.44%
BAE Systems (BA.) 596.40p -0.40%

FTSE 250 - Risers

Ashmore Group (ASHM) 423.40p 6.92%
JD Sports Fashion (JD.) 375.60p 6.43%
Travis Perkins (TPK) 1,286.00p 3.33%
WH Smith (SMWH) 1,916.00p 3.07%
Ocado Group (OCDO) 524.00p 2.75%
Sophos Group (SOPH) 485.10p 2.21%
Kier Group (KIE) 1,019.00p 2.21%
Dunelm Group (DNLM) 570.00p 2.06%
Melrose Industries (MRO) 228.10p 2.01%
Games Workshop Group (GAW) 2,467.40p 1.96%

FTSE 250 - Fallers

Vedanta Resources (VED) 685.80p -3.90%
Serco Group (SRP) 93.35p -2.51%
Cairn Energy (CNE) 213.60p -2.47%
Sanne Group (SNN) 599.00p -2.44%
IG Group Holdings (IGG) 801.50p -2.14%
Dechra Pharmaceuticals (DPH) 2,762.00p -2.13%
Ferrexpo (FXPO) 206.40p -2.04%
Ultra Electronics Holdings (ULE) 1,383.00p -1.71%
Renishaw (RSW) 4,760.00p -1.65%
Senior (SNR) 290.00p -1.56%

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