FTSE 100 Live: ‘Brightening outlook for retailers’; gilts remain in focus
Miners lead FTSE 100 recovery, ASOS shares higher
A turbulent week for London shares is ending on an upbeat note after the FTSE 100 index traded 0.7% higher, up 53.41 points at 7624.28.
The improvement, which follows worries over the US debt ceiling and the prospect of higher interest rates, was driven by the mining sector.
Rio Tinto shares surged 4% or 190.4p to 4948.4p after Morgan Stanley raised its price target to 5800p, while Antofagasta, Anglo American and Glencore were also up 3%.
Vodafone shares fell another 0.8p to 80.3p, while Persimmon lost 9p to 1210.5p after analysts at Deutsche Bank lowered their price target on the housebuilder to 1212p.
The FTSE 250 index rose 26.76 points to 18,867.51, led by ASOS as shares lifted 32p to 450.1p on the back of moves to bolster the retailer’s balance sheet. The efforts included a £75 million share placing, which was priced at last night’s close of 418.1p.
“Light at the end of the tunnel”
Phil Monkhouse, Head of sales at global financial services firm Ebury, said today’s retail sales figures show a “light at the end of the tunnel”.
“Following months of consumers tightening their belts to the detriment of retailers, April’s uptick in spending suggests that there is light at the end of the tunnel for the businesses hit hardest by the cost-of-living crisis’ impact on sales.”
“With summer well on its way, it’s important for retailers to take full advantage of the good weather and holiday spending, having ready stock and the ability to act quickly and cost-effectively will be key to prospering from this upswing in spending.”
ASOS taps investors for £80m, agrees new loans
ASOS shares are in focus today after the fast fashion retailer last night announced a £75 million City fundraising as part of efforts to strengthen its balance sheet.
Alongside the fully underwritten placing, the FTSE 250-listed company has entered into a new long-term £275 million financing facility with specialist lender Bantry Bay Capital.
It is also planning to raise up to £5 million from retail investors by offering new shares through the PrimaryBid platform at last night’s closing price of 418.1p. That compares with a level of more than 1,500p just under a year ago.
Economists warn high street slowdown is still to come
Ashley Webb, UK economist at Capital Economics, warned that, while April retail sales were strong, it was only a matter of time before sky-high interest rates hit high-street spending.
“The rebound in April was widespread. Food sales rose by 0.7% m/m, and sales rose in four of the other six main categories. The largest increases were in “other” store and department store sales, which rose by 2.1% m/m and 1.7% m/m respectively. Online sales rebounded in April by 0.2% m/m following a 1.4% drop in March. Household goods sales slipped by 0.2% m/m and fuel sales fell by 2.2% m/m, which may have been due to an increase in the use of public transport as there were no strikes in April.
“Overall, while the outlook for retail sales appears to be improving, we expect further rises in interest rates, from 4.50% now to a peak of 5.25%, and for them to stay high until late next year. That will mean real consumer spending is more likely to decline later this year than rise.”
US tech stocks soar, FTSE 100 steadies after big losses
Stocks in the technology sector dominated Wall Street trading yesterday after Nvidia’s stronger-than-expected quarterly results.
Buyers focused on semiconductor and AI-related stocks as the Nasdaq Composite rallied 1.7% and the S&P 500 index lifted 0.9%, even though only 40% of its constituents were in positive territory. Nvidia shares finished 24% higher.
Marvell Technology kept the momentum going after the closing bell by posting better-than-expected results and forecasting a doubling in AI-related revenues this year.
Its shares rose 17% in after-hours trading, on top of the 8% seen in regular dealings.
In contrast to the tech-focused gains elsewhere, the Dow Jones Industrial Average fell for a fifth straight session as US debt ceiling talks continued ahead of the 1 June default deadline.
Deutsche Bank strategist Jim Reid said: “We still don’t have a deal yet, but the latest developments yesterday raised hopes that an agreement can be reached ahead of the deadline.”
The uncertainty has contributed to the FTSE 100 index losing 200 points in the past two sessions, although CMC Markets expects a steadier session today after forecasting an unchanged start at 7570.
Retail sales back to growth in April
Retail sales were up 0.5% in April as shoppers returned to the high street following a decline in March.
The growth was ahead of the expected figure of 0.3%.
Food store sales volumes were up by 0.7%, while non-food store sales were up 1%. Other volumes, which are mostly online sales, were up more slowly, at 0.2%.
However, March’s figure was also revised down. The ONS now says sales that month were down by 1.2%, rather than 0.9%, as bad weather kept shoppers at home.
ONS Chief Economist Grant Fitzner said: “Retail sales grew, partially rebounding from a poor weather affected March, with jewellers, sports retailers and department stores all having a good month. Despite continued high food prices, supermarkets also recovered from the fall in March.
“However, these were partly offset by a drop in the amount of fuel sold, despite prices also dropping.”