London close: Collapse in the pound keeps FTSE above water
London stocks were in a mixed state by the close on Friday, after the latest retail sales data beat expectations, while consumer confidence reached a fresh low.
The FTSE 100 ended the session up 0.11% at 7,550.37, while the FTSE 250 lost 1.24% to finish at 19,887.79.
Sterling was in the red as well, last trading down 0.91% on the dollar at $1.1821, and sliding 0.49% against the euro to change hands at €1.1770.
“European equities have been hit hard today, as markets start to show signs of a potential impending bearish reversal coming into play,” said IG senior market analyst Joshua Mahony.
“Fortunately for UK investors, the FTSE 100 has managed to perch itself on an island of green, with a collapse in the pound helping to avoid the seemingly inevitable drop into the surrounding red sea.
“The resurgence in the dollar seen this week serves to highlight the growing feeling that we are on the cusp of another slump, as investors prepare to head for the exit doors once again.”
In economic news, UK retail sales unexpectedly rose in July, boosted by online shopping, according to figures from the Office for National Statistics.
Retail sales were up 0.3% following a 0.2% fall in June, and versus expectations for a 0.2% decline.
On the year, however, retail sales were 3.4% lower, compared to expectations for a 3.3% drop.
Sales volumes were 2.3% above their pre-coronavirus February 2020 levels, but down over the past year.
The figures showed that non-store retailing - namely online retailers - saw sales rise 4.8% on the month in July thanks to a range of promotions.
“The summer sunshine brought a slight uplift in sales,” said Helen Dickinson, chief executive of the British Retail Consortium.
“Summer clothing, air conditioning appliances and outdoor foods all benefited from record temperatures, but most retailers will still be seeing falling volumes in the face of rising inflation.”
Dickinson said consumer confidence had, however, hit new lows as inflation soared past 10% and talk of a recession grew louder.
“The Bank of England expects inflation to reach over 13% in October when energy bills rise again, further limiting discretionary spending for struggling households.
“For many businesses, 2022 is proving to be every bit as challenging as the pandemic.”
UK consumer confidence fell to a fresh record low in August, meanwhile, amid surging inflation, as the GfK consumer sentiment index dipped three points from July to -44.0 - the lowest level since records began in 1974.
The index for people’s personal financial situation over the last 12 months declined to -25 in August from -23 the month before, while the same gauge for the next 12 months fell to -31 from -36.
At the same time, the index for the general economic situation over the last year dipped to -68 from -66, while the index for the same situation over the next 12 months deteriorated to -60 from -57.
The major purchase index printed at -38 in August, from -34 in July.
“All measures fell, reflecting acute concerns as the cost-of-living soars,” said Joe Staton, client strategy director at GfK.
“A sense of exasperation about the UK’s economy is the biggest driver of these findings.
“Our sub-measure on the general economy over the past year has decreased month-on-month since December 2021 - that’s eight months in a row”
Staton said a similarly-consistent sharp decline since December was evident in how consumers saw the economy in a year’s time, with the new score of -60 setting a new record.
“These findings point to a sense of capitulation, of financial events moving far beyond the control of ordinary people.
“With headline after headline revealing record inflation eroding household buying power, the strain on the personal finances of many in the UK is alarming.
“Just making ends meet has become a nightmare and the crisis of confidence will only worsen with the darkening days of autumn and the colder months of winter.”
Finally on data, Britain's public sector borrowed more than expected last month amid increased costs for servicing its debt and rising social assistance payments.
According to the Office for National Statistics, the country's public sector net borrowing increased by £4.9bn in July, well above the £3.2bn pencilled in by analysts.
It was also more than the £0.2bn rise predicted by the Office for Budget Responsibility.
On London’s equity markets, pharmaceutical companies were in favour on an unusually quiet day for corporate news, with AstraZeneca up 2.14%, GSK ahead 1.65%, and Reckitt Benckiser Group adding 2.46%.
On the downside, British Airways and Iberia owner IAG descended 5.11% after the USO union called a 10-day strike involving staff at the regional Iberia Express carrier, set to begin on 28 August and last until 6 September.
EasyJet shares also fell, declining 6.29% as the low cost airline's Spanish pilots continued their strike action.
Construction and landscaping materials firm Marshalls tumbled 10.19% on the back of the consumer confidence dive, having reported earlier in the week that the uncertain outlook would hit its landscaping unit as consumers reined in discretionary spending.
Outside the FTSE 350, Cineworld Group shares went into freefall on a report that the world’s second largest cinema chain was preparing to file for bankruptcy amid plunging ticket sales after Covid pandemic restrictions were lifted.
The value of the movie house chain plunged 58.27% by the close, with the company labouring under a $4.8bn (£4bn) debt burden, reportedly hiring lawyers and consultants to advise on any bankruptcy.
The Wall Street Journal said it was expected to file a Chapter 11 petition in the US, and was considering insolvency proceedings in the UK.
Elsewhere, Joules Group plummeted 39.25% after the fashion retailer warned that it was expecting a pre-tax loss for the full year, "significantly" below current market forecasts, following recent soft trading.
Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti and Alexander Bueso.
FTSE 100 - Risers
Reckitt Benckiser Group (RKT) 6,674.00p 2.46%
AstraZeneca (AZN) 11,250.00p 2.14%
Avast (AVST) 698.00p 1.69%
Unilever (ULVR) 4,004.00p 1.68%
GSK (GSK) 1,425.20p 1.65%
Diageo (DGE) 3,960.00p 1.47%
Shell (SHEL) 2,248.50p 1.40%
BP (BP.) 447.80p 1.31%
Auto Trader Group (AUTO) 675.00p 1.14%
Admiral Group (ADM) 2,320.00p 1.00%
FTSE 100 - Fallers
International Consolidated Airlines Group SA (CDI) (IAG) 113.10p -5.11%
Persimmon (PSN) 1,670.00p -4.08%
Entain (ENT) 1,319.00p -3.86%
Howden Joinery Group (HWDN) 634.60p -3.67%
SEGRO (SGRO) 1,018.00p -3.60%
Antofagasta (ANTO) 1,130.50p -3.33%
Kingfisher (KGF) 239.90p -3.27%
Intermediate Capital Group (ICP) 1,469.00p -3.13%
Scottish Mortgage Inv Trust (SMT) 862.20p -2.91%
Rolls-Royce Holdings (RR.) 81.26p -2.80%
FTSE 250 - Risers
Bank of Georgia Group (BGEO) 2,065.00p 2.48%
Plus500 Ltd (DI) (PLUS) 1,824.00p 1.96%
Target Healthcare Reit Ltd (THRL) 115.00p 1.58%
Network International Holdings (NETW) 238.60p 1.53%
Fidelity China Special Situations (FCSS) 244.50p 1.45%
Syncona Limited NPV (SYNC) 206.00p 1.23%
3i Infrastructure (3IN) 342.00p 1.03%
Coats Group (COA) 63.10p 0.96%
Chrysalis Investments Limited NPV (CHRY) 87.50p 0.92%
Serco Group (SRP) 180.30p 0.90%
FTSE 250 - Fallers
Marshalls (MSLH) 379.00p -10.19%
Genuit Group (GEN) 390.00p -6.47%
easyJet (EZJ) 383.00p -6.29%
ASOS (ASC) 765.00p -5.56%
Investec (INVP) 425.40p -5.49%
Pets at Home Group (PETS) 337.60p -5.38%
Dunelm Group (DNLM) 762.50p -5.22%
TI Fluid Systems (TIFS) 161.20p -5.18%
Wizz Air Holdings (WIZZ) 2,329.00p -5.17%
Grafton Group Ut (CDI) (GFTU) 742.60p -5.15%