Retail sales figures today failed to offer much cheer after yesterday’s warning that the UK will stagnate in the fourth quarter.
The recovery from October’s pre-Budget reverse of 0.7% was smaller than expected, offset by a boost from an undershoot on public sector borrowing.
Fears of a US government shutdown and prospect of interest rates staying higher for longer also continue to impact stock market confidence.
FTSE 100 Live Friday
- FTSE 100 selling continues
- Retail sales figures miss hopes
- Royal Mail deal gets security go-ahead
Market update: FTSE 100 reverse continues, water companies lower
10:27 , Graeme EvansThe jittery end to 2024 continued today as US worries and disappointing UK retail sales figures fuelled another poor session for the FTSE 100 index.
London’s top flight has fallen more than 3% this week, with the latest reverse of 0.9% or 70.14 points leaving the benchmark at a one-month low of 8035.18.
Having topped 8450 in May, the year has petered out on fears of higher-for-longer global interest rates and fresh signs of economic stagnation in the UK.
The latest retail figures showed volumes rose by 0.2% in November, better than the 0.7% pre-Budget reverse but down on City forecasts of 0.5%.
There was some cheer for chancellor Rachel Reeves, however, after public sector borrowing of £11.2 billion undershot forecasts last month.
Meanwhile, stock markets are still coming to terms with the Federal Reserve’s updated guidance pointing to as few as two interest rate cuts in 2025.
The Fed’s preferred measure of inflation is due for release later, with market caution also reflecting events in Congress as politicians struggle to secure a short-term funding deal that will prevent a shutdown of government services.
Wall Street shares fell sharply towards the end of yesterday’s session, with futures pointing to another weaker performance later today.
Cheaper stocks in London included Barclays, which has significant investment banking and consumer lending operations in the United States.
It fell 5.2p to 255.1p during a session when NatWest also gave up some of this strong gains with a decline of 71.1p to 392.9p and HSBC lost 10.9p to 754.2p.
Severn Trent shares were 56p lower at 2518p after rising yesterday on the back of Ofwat final determination. United Utilities dropped 2.5% or 27.5p to 1036.5p.
On the risers board, Rentokil Initial led the way with a gain of 6.6p to 398.2p while warehouse and industrial property firm Segro lifted 6.4p to 688.4p on the back of Citigroup’s price target of 1102p.
The FTSE 250 index dropped 0.5% or 108.96 points to 20,290.42.
South West Water owner Pennon fell 3% or 18.5p to 569p and Hochschild Mining dropped 4% or 9.5p to 206.5p at the top of the fallers board.
Banks and miners lead latest FTSE 100 fall, Severn Trent retreats
08:37Banking stocks are among those under pressure during another downbeat session for the FTSE 100 index.
Barclays fell 3.45p to 256.8p and NatWest by 3.8p to 396.2p, although both are sharply higher over the year-to-date.
Rio Tinto dropped 47p to 4646p and Anglo American weakened 19p to 2319p in the mining sector, while British Gas owner Centrica fell 1.35p to 124.5p.
Severn Trent shares also gave up some of their gains after yesterday’s Ofwat final determination, dropping 26p to 2548p.
The FTSE 100 index fell 0.4% or 89.52 points to 20,309.86, reducing gains for 2024 to 4.4%.
Richard Hunter, head of markets at Interactive Investor, said this year has been one of missed opportunities after a promising start for the UK market.
He said: “The patently undemanding valuations which are attached to UK stocks on both a historic and comparable basis to global peers has not been recognised.
“Hopes for a rerating of the market have been in place for some considerable time and the optimists can but hope that 2025 could mark a turning point at last.”
Borrowing boost for chancellor, retail sales disappoint
08:16 , Graeme EvansFigures on the UK’s public finances today offered cheer for Rachel Reeves after borrowing of £11.2 billion came in well below the £13 billion forecast.
Capital Economics said: “Christmas has come early for the Chancellor with borrowing undershooting expectations in November.
“But the weakening in the economy and recent rises in market interest rates suggests the government will still struggle to bring the deficit down as quickly as planned.
“That raises the chances that extra revenue-raising tax hikes or spending cuts will be required.”
On retail sales, the consultancy said November’s figure leaves sales volumes on course to decline in the fourth quarter overall.
It added: “That said, as real incomes continue to grow and consumer confidence improves next year, we think the retail sector will contribute to an acceleration in consumer spending growth from around 0.7% in 2024 to 1.6% in 2025.”
US shutdown and rates worries fuel Wall Street selling
08:08 , Graeme EvansFears over a US government shutdown and the release of the Federal Reserve's preferred inflation measure mean Wall Street futures are pointing lower.
The latest selling comes after policymakers spooked markets on Wednesday by signalling just two interest rate cuts in 2025.
Hargreaves Lansdown head of equity research Derren Nathan said: “Today’s Personal Consumption Expenditure index for November is likely to be the key driver of sentiment.
“The expectation is that this key inflation measure has risen by 0.1 percentage points since October to 2.9%.
“Getting to the 2% target is proving to be harder than expected and if inflation comes in north of consensus, that’s likely to set investor nerves further on edge.”
Meanwhile, US Congress has less than 24 hours to secure a short-term funding deal that will prevent a shutdown of government services.
The weak sentiment has impacted European markets, with the FTSE 100 index following yesterday’s 1.1% decline with a fall of 0.3% or 27.74 points to 8077.58.
Royal Mail takeover moves step closer
07:47 , Graeme EvansThe takeover of Royal Mail’s owner by Czech billionaire Daniel Kretinsky’s EP Group has received clearance under the National Security and Investment Act.
The development is in addition to this week’s legally binding undertakings with the government, including the use of a “golden share” in the postal service.
The £3.6 billion deal for International Distribution Services is expected to complete in the first quarter of 2025, subject to shareholder approval.
Retail sales higher, public sector borrowing at £11.25bn
07:12 , Graeme EvansRetail sales volumes for November today showed a recovery from October’s pre-Budget reverse of 0.7%.
The 0.2% improvement in the headline figure including fuel sales compared with expectations for a 0.5% rise.
Growth in supermarkets and other non-food stores was partly offset by a fall in clothing retailers.
Meanwhile, public sector borrowing for the month of £11.25 billion beat City forecasts.
The figure was £3.4 billion less than in November 2023 and the lowest November borrowing for three years.
Borrowing in the financial year to November was £113.2 billion, £400 million less than a year ago but still the third-highest financial year-to-November borrowing since monthly records began in January 1993.
FTSE 100 set for fresh fall, pound at $1.25
07:02 , Graeme EvansThe poor run for the FTSE 100 index is set to continue after yesterday’s slide of 1.1%.
London’s top flight closed at a one-month low last night and is forecast to open down 18 points at 8088 this morning.
The selling followed the US Federal Reserve’s guidance on Wednesday for fewer-than-expected interest rate cuts in 2025.
Wall Street markets posted a steadier session yesterday, with the Dow Jones Industrial Average slightly higher to mark the end of its long losing streak.
The pound stood at $1.2503 ahead of this morning’s retail sales and public sector borrowing figures, having fallen sharply after yesterday’s Bank of England decision.
