London close: Strength in Sterling puts a lid on stocks

London stocks traded fairly flat on Wednesday as the pound popped higher on the back of stronger than expected retail sales data, even as traders waited on the US Federal Reserve's policy announcement later in the day.

The FTSE 100 was marginally lower by the close at 7,271.95, down 0.05%, while the pound was 0.33% firmer versus the dollar at 1.3555, having shot up to 1.3600 immediately after the release of the retail sales figures, which revealed a spike higher on the back of inflationary pressures and increased sales volumes in August.

On the European side, bourses were all relatively flat on the day with the DAX up 0.06% to 12,569.17, the CAC 40 0.08% higher to 5,241.66 and the IBEX 35 0.83% lower at 10,292.10.

Retail sales increased 1% month-on-month in August, much higher than the 0.2% consensus forecast and an improvement on the 0.7% revised figure from a month earlier.
Compared to last year, retail sales were 2.8% higher versus expectations of a 1.4% rise and up from 1.7% in the prior month, the Office for National Statistics said.

The contribution of food stores remained flat year-on-year and there was a fall in the contribution of growth from petrol stations, which the ONS said showed most of the overall growth came from "non-essential items".

Store prices increased across all store types, with non-food store prices up 3.2% on last year from 2.7% the month before, while non-store prices rose 3.3%, both their highest year-on-year price growth since March 1992.

The pound gained as the robust sales data was seen as increasing the odds that the Bank of England will raise interest rates in November, but the currency eased off soon after.

Spreadex analyst Connor Campbell highlighted three factors that were likely to have contributed to sterling's easing: "First is the fear that the increase in spending is being fuelled by a rise in consumer credit, an issue the Bank of England has repeatedly warned on in recent months.

"Then there was the latest round of economic projections from the OECD, which puts the UK at the bottom of the G7 GDP table with expectations of just 1% growth in 2018 (that compares to a forecast 1.9% jump in the Eurozone, and a 2.1% rise by Germany). Of course, a large part of the swift return to forex flatness is the impending Federal Reserve meeting."

The Fed was widely expected to stand pat on rates when it announced its latest policy decision at 1900 BST, leaving market participants eyeing the statement at 1930 BST as the central bank has been signalling that it plans to soon wind down its balance sheet.

On the corporate front, Kingfisher rallied after the B&Q and Screwfix owner posted better profits than were expected for the first half of the year but remained cautious on the second half backdrop in the UK and France.

GlaxoSmithKline advanced as it reported positive headline results from a phase-three impact study of Trelegy Ellipta, a triple-therapy inhaler for patients with chronic obstructive pulmonary disease.

Retailers Marks & Spencer and Next were on the front foot, boosted by the ONS retail sales data, while Babcock racked up healthy gains after reiterating its guidance for the year and saying trading has been in line with its expectations.

Domino's Pizza gained ground after announcing a £15m share buyback programme while Cairn Energy edged lower as it said a final hearing for its tax dispute with India has been scheduled for August 2018.

Outsourcer Mitie traded 0.58% lower as it said it will cut 480 jobs by the end of the year as a result of its transformation programme and that it is considering selling its property management division.

Shire nudged a touch higher after saying that it and its Japanese partner Shionogi saw positive results from a phase III clinical trial of Intuniv in adults with attention deficit hyperactivity disorder.

Diageo was in the red as it said it remained "well set up" to deliver in line with its own expectations but warned that the first-half organic net sales growth rate will be hit by the later timing of Chinese New Year and by the expected impact of the ban on alcohol sales near highways in India.

Metro Bank was under pressure as Macquarie initiated coverage of the stock at 'underperform', while BTG fell after saying it has been ordered to pay $55.8m in damages plus interest and costs to Wellstat Therapeutics in a dispute over the distribution of Vistogard, an antidote to the overdose of two chemotherapy drugs.

Market Movers

FTSE 100 (UKX) 7,271.95 -0.05%
FTSE 250 (MCX) 19,540.77 0.03%
techMARK (TASX) 3,427.11 -0.12%

FTSE 100 - Risers

Babcock International Group (BAB) 846.50p 5.81%
Kingfisher (KGF) 313.00p 5.60%
ITV (ITV) 162.20p 2.79%
Convatec Group (CTEC) 269.50p 2.78%
WPP (WPP) 1,382.00p 2.52%
Marks & Spencer Group (MKS) 348.00p 2.35%
Barratt Developments (BDEV) 602.00p 2.03%
Next (NXT) 5,070.00p 1.85%
Whitbread (WTB) 3,690.00p 1.82%
Sage Group (SGE) 713.50p 1.57%

FTSE 100 - Fallers

Diageo (DGE) 2,426.50p -2.78%
International Consolidated Airlines Group SA (CDI) (IAG) 596.50p -1.65%
Barclays (BARC) 185.90p -1.27%
Ashtead Group (AHT) 1,763.00p -1.23%
St James's Place (STJ) 1,123.00p -1.14%
NMC Health (NMC) 2,688.00p -1.14%
Burberry Group (BRBY) 1,758.00p -1.12%
RSA Insurance Group (RSA) 624.50p -1.11%
Mediclinic International (MDC) 685.00p -0.94%
British American Tobacco (BATS) 4,606.00p -0.91%

FTSE 250 - Risers

Domino's Pizza Group (DOM) 293.10p 6.54%
Cineworld Group (CINE) 644.00p 3.95%
Aggreko (AGK) 904.50p 3.73%
Auto Trader Group (AUTO) 376.00p 3.33%
Telecom Plus (TEP) 1,112.00p 2.94%
Provident Financial (PFG) 758.00p 2.92%
IP Group (IPO) 129.30p 2.71%
Dixons Carphone (DC.) 176.60p 2.67%
Royal Mail (RMG) 388.20p 2.56%
Clarkson (CKN) 2,897.00p 2.37%

FTSE 250 - Fallers

Metro Bank (MTRO) 3,335.00p -4.04%
Spire Healthcare Group (SPI) 239.10p -3.24%
Fisher (James) & Sons (FSJ) 1,437.00p -3.04%
Lancashire Holdings Limited (LRE) 635.00p -2.68%
Just Group (JUST) 149.40p -2.54%
JD Sports Fashion (JD.) 383.60p -2.49%
Ultra Electronics Holdings (ULE) 1,747.00p -2.46%
PZ Cussons (PZC) 329.90p -2.19%
UDG Healthcare Public Limited Company (UDG) 835.50p -1.99%
Ibstock (IBST) 231.00p -1.99%