London close: Stocks bounce as analysts mull life after Theresa May

London stocks finished higher on Friday, tracking opening gains for stocks on Wall Street despite a small bid and following the widely expected resignation of Prime Minister Theresa May.

The FTSE 100 was 0.65% firmer at 7,277.73, while the pound edged higher, trading up 0.38% against the US dollar to 1.27045 and by another 0.2% versus the euro to stand at 1.1342, even after May said she would step down as leader of the Conservative party on 7 June, triggering the process to choose her successor, with Boris Johnson widely seen as the front runner to take over.

Spreadex analyst Connor Campell said it's hard to see what the thinking is behind sterling’s rise.

"The chance of a no-deal Brexit has only increased, be it either through the UK bungling out of the EU because it can’t get its house in order, or because the Tories will appoint a hardline Brexiter as leader following the mass defection of voters to Nigel Farage’s Brexit Party during the European elections," he said.

Meanwhile, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that even with a true Brexiteer as PM, a no-deal Brexit remains unlikely.

"Changing the leader won’t alter the maths in parliament. A new PM might be more willing to attempt a no-deal Brexit, but we believe enough sane heads in the Tory party would abstain or vote against the government in a confidence vote - which the opposition can call at any time - to stop it in its tracks."

Tombs said Pantheon’s base case now is that the UK remains stuck in its current state of Brexit limbo for at least another year.

"The necessary political support to make a decisive Brexit step - in any direction - does not exist. As a result, the UK likely will drift towards the current October deadline, and future cliff-edges, before requesting an extension at the last minute. EU leaders will loathe this continual procrastination, but they too have no desire to force Britain out and experience the pain of a no-deal Brexit."

But analysts at Morgan Stanley said they now see a more binary outcome, with a higher probability of either a hard Brexit, at 25%, or remain, at 45%.

With all eyes firmly on an emotional Theresa May, the latest retail sales figures from the Office for National Statistics failed to make a splash.

The data showed retail sales were steady on the month in April versus the previous month. This was ahead of analysts' expectations for a 0.3% decline.

On the year, retail sales rose 5.2%, surpassing expectations for a 4.6% increase. The ONS said clothing sales were boosted by warm weather, which helped to offset a drop in sales in other areas.

In the three months to April, retail sales pushed up 1.8%.

Online retailing accounted for 18.7% of total retailing in April compared to 17.7% in the same month last year, with overall growth of 10.1% versus April 2018.

ONS head of retail sales Rhian Murphy said: "Retail growth was strong in the three months to April with a record quarter for the online sector, driven mainly by clothing purchases, with warmer weather. Elsewhere, department stores continued to see their sales fall."

More broadly, the positive tone in markets was attributed in part to the latest comments from US President Trump.

Connor Campbell said: "While labelling Huawei as ‘something that is very dangerous’, the President nevertheless went on to state that it is possible the tech company would ‘be included in some kind of trade deal’. That confusing statement potentially pushes open, however slightly, a door that was about to slam shut, and makes June’s G20 summit in Osaka even more interesting."

In equity markets, Informa rallied as the publishing and events company said it traded well in the first four months of 2019 and was confident about meeting expectations for annual results.

Spectris gained as it said trading in the first four months of the year had been in line with expectations, with like-for-like sales up 3% despite a moderation in some of its end markets.

Royal Mail was a high riser following heavy losses a day earlier and on the back of an upgrade to ‘buy’ at Goldman Sachs and to ‘hold’ at Liberum.

Vodafone was boosted by an upgrade to ‘buy’ from ‘hold’ at HSBC, while Mitchells & Butlers fizzed higher thanks to an upgrade to ‘buy at Citi and Serco was lifted by an upgrade to ‘buy’ at Liberum.

On the downside, South Africa-based financial services company Old Mutual was under the cosh after saying it had suspended chief executive officer Peter Moyo with immediate effect due to "a material breakdown in trust".

Market Movers

FTSE 100 (UKX) 7,277.73 0.65%
FTSE 250 (MCX) 19,127.26 0.50%
techMARK (TASX) 3,529.23 0.37%

FTSE 100 - Risers

Evraz (EVR) 607.20p 3.41%
Antofagasta (ANTO) 802.00p 2.87%
Hiscox Limited (DI) (HSX) 1,654.00p 2.80%
Auto Trader Group (AUTO) 597.40p 2.79%
SSE (SSE) 1,038.00p 2.52%
Informa (INF) 789.20p 2.49%
BHP Group (BHP) 1,800.00p 2.42%
Smurfit Kappa Group (SKG) 2,256.00p 2.31%
Anglo American (AAL) 1,945.20p 2.26%
Vodafone Group (VOD) 125.88p 2.25%

FTSE 100 - Fallers

International Consolidated Airlines Group SA (CDI) (IAG) 469.20p -2.17%
Paddy Power Betfair (PPB) 5,676.00p -1.83%
ITV (ITV) 108.05p -1.23%
BT Group (BT.A) 196.26p -1.14%
easyJet (EZJ) 919.00p -0.86%
Centrica (CNA) 92.82p -0.83%
Fresnillo (FRES) 726.80p -0.82%
Ferguson (FERG) 5,160.00p -0.77%
Pearson (PSON) 801.80p -0.64%
BAE Systems (BA.) 450.10p -0.64%

FTSE 250 - Risers

Babcock International Group (BAB) 460.00p 10.39%
Royal Mail (RMG) 209.50p 6.42%
Merlin Entertainments (MERL) 378.10p 5.45%
Entertainment One Limited (ETO) 439.00p 5.17%
Pets at Home Group (PETS) 183.60p 4.56%
Ferrexpo (FXPO) 221.90p 4.03%
Clarkson (CKN) 2,365.00p 3.73%
Euromoney Institutional Investor (ERM) 1,336.00p 3.41%
Galliford Try (GFRD) 538.50p 3.16%
Premier Oil (PMO) 84.32p 2.83%

FTSE 250 - Fallers

Kier Group (KIE) 281.60p -6.63%
B&M European Value Retail S.A. (DI) (BME) 347.50p -4.24%
Centamin (DI) (CEY) 87.24p -3.67%
Sophos Group (SOPH) 405.90p -3.13%
QinetiQ Group (QQ.) 303.00p -3.01%
Metro Bank (MTRO) 752.00p -2.59%
Ibstock (IBST) 242.60p -2.41%
Synthomer (SYNT) 379.00p -2.32%
Elementis (ELM) 150.10p -2.09%
Morgan Advanced Materials (MGAM) 248.80p -1.97%