London close: Stocks finish firmer as banks rally
London stocks were well into positive territory at the close on Friday, with banks pacing the advance after well-received results from Barclays, as investors shrugged off news that the UK’s economic recovery was stalling.
The FTSE 100 ended the session up 1.29% at 5,860.28, and the FTSE 250 was 1.2% firmer at 18,109.57.
Sterling was in the red, however, last trading 0.34% weaker against the dollar at $1.3039 and losing 0.53% on the euro to €1.1011.
“Sentiment has been lifted by last night’s news that remdesivir, an antiviral drug produced by Gilead Sciences, received approval as a treatment by the US regulator, the FDA,” said CMC Markets analyst David Madden.
“For much of the week, stocks in Europe have incurred declines because of concerns about the health crisis and sticker restrictions.”
Madden said the absence of a coronavirus relief package in the US was a factor as well.
“Traders are content to buy back into the market now that some progress has been made in tackling the health crisis.
“In London, oil, banking, travel, house builders and supermarket stocks are showing decent gains, so it is a broad based rally.”
On the macroeconomic front, news was mixed, with figures released earlier by the Office for National Statistics showing an improvement in retail sales in September for the fifth consecutive month, as they continued to recover from the Covid-19 slump.
Sales increased 1.5% on the month in September, beating expectations for a 0.4% increase.
On the year, sales were up 4.7%, coming in ahead of expectations for a 2.7% jump.
When compared with pre-pandemic levels in February, total retail sales were 3.9% and 5.5% higher in value and volume terms, respectively.
In the three months to September, retail sales volumes rose 17.4% compared to the previous three months.
That marked the largest quarterly increase on record as sales picked up from record-low levels earlier in the year.
Despite the solid figures, analysts were cautious over the outlook, with ING economist James Smith saying the UK’s "remarkable recovery" was set to stall.
"Retail sales continue to exceed their pre-virus levels, but renewed closures in Wales and the knock-on effect of tiered restrictions elsewhere suggest revenues will come under renewed pressure on the high street, as we edge towards the key Christmas trading period," he said.
Meanwhile, Howard Archer, chief economic adviser to EY Item Club, noted that following the strong third quarter bounce back, the outlook for retail sales and consumer spending looked more challenging in the near-term.
“This reflects increased restrictions on activity, possible markedly rising unemployment, limited earnings and mounting consumer caution.”
In addition, a survey from IHS Markit/CIPS showed the UK’s economic recovery stalled in October amid rising coronavirus cases and increased restrictions, with growth in the services sector slowing considerably.
The flash composite purchasing managers’ index - which measures activity in manufacturing and services - fell to 52.9 from 56.5 in September, coming in below consensus expectations of 54.0.
It had peaked at 59.1 in August, with a reading above 50.0 indicating expansion, while a reading below signalling contraction.
The services PMI edged down to 52.3 in October from 56.1 the month before, while economists had been expecting a reading of 53.9.
That was also below August's recent peak of 58.8 and pointed to the worst performance for the sector since June.
The manufacturing PMI declined to 53.3 from 54.1, versus expectations for a reading of 53.1.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the drop in the flash composite PMI to near the 50-mark that theoretically denotes no change in GDP adds to evidence that the economic recovery has ground to a halt.
"The second wave of Covid-19 is the obvious driver of the slowdown, though the recovery likely would have decelerated anyway, given that the burst of pent-up demand for services after the lockdown was lifted in July never was likely to be sustained.
"Note too that the PMI is a diffusion index which does not capture the magnitude of changes in demand at businesses.
“It will be too upbeat if, as seems to be happening now, most firms are growing modestly but a few in the consumer services sector are experiencing dramatic falls in demand.”
In equity markets, banks were the standout performers, with Barclays 6.96% higher after it reported better-than-expected third-quarter profits on the back of a strong performance from its consumer businesses as bad loan provisions fell sharply from the previous three months.
The bank posted a pre-tax profit of £1.1bn for the three months to September, compared with £200m a year ago and double analysts’ forecasts.
Other banks followed suit, with Lloyds Banking Group up 4.91%, Standard Chartered ahead 4.2%, HSBC rising 4.71%, and NatWest ahead 3.15%.
FTSE 100 - Risers
Barclays (BARC) 111.54p 6.96%
Rolls-Royce Holdings (RR.) 238.10p 4.94%
Lloyds Banking Group (LLOY) 29.28p 4.91%
HSBC Holdings (HSBA) 321.40p 4.71%
International Consolidated Airlines Group SA (CDI) (IAG) 109.00p 3.96%
British Land Company (BLND) 380.20p 3.94%
Taylor Wimpey (TW.) 119.40p 3.87%
Standard Chartered (STAN) 397.70p 3.76%
BAE Systems (BA.) 458.80p 3.73%
Smiths Group (SMIN) 1,417.00p 3.58%
FTSE 100 - Fallers
Pearson (PSON) 510.80p -1.96%
InterContinental Hotels Group (IHG) 4,201.00p -1.45%
Just Eat Takeaway.Com N.V. (CDI) (JET) 9,194.00p -1.39%
Ocado Group (OCDO) 2,313.00p -1.24%
London Stock Exchange Group (LSE) 8,416.00p -1.17%
Hikma Pharmaceuticals (HIK) 2,549.00p -1.09%
Avast (AVST) 494.40p -0.96%
Polymetal International (POLY) 1,759.00p -0.90%
Fresnillo (FRES) 1,218.50p -0.81%
GVC Holdings (GVC) 1,004.00p -0.69%
FTSE 250 - Risers
Provident Financial (PFG) 228.20p 10.67%
Shaftesbury (SHB) 454.80p 8.29%
AO World (AO.) 364.50p 7.05%
Capital & Counties Properties (CAPC) 110.00p 6.59%
Wetherspoon (J.D.) (JDW) 923.50p 6.15%
Moneysupermarket.com Group (MONY) 253.80p 5.49%
Vistry Group (VTY) 602.50p 5.42%
TUI AG Reg Shs (DI) (TUI) 322.90p 5.35%
Liontrust Asset Management (LIO) 1,295.00p 5.28%
Ibstock (IBST) 179.20p 5.23%
FTSE 250 - Fallers
Computacenter (CCC) 2,400.00p -4.00%
Greencore Group (GNC) 100.40p -2.43%
AJ Bell (AJB) 411.50p -2.26%
CLS Holdings (CLI) 193.20p -2.13%
Domino's Pizza Group (DOM) 317.20p -2.10%
C&C Group (CCR) 174.80p -2.02%
Cranswick (CWK) 3,390.00p -1.63%
Cineworld Group (CINE) 28.98p -1.50%
Just Eat Takeaway.Com N.V. (CDI) (JET) 9,194.00p -1.39%
RHI Magnesita N.V. (DI) (RHIM) 2,828.00p -1.26%