London midday: Stocks extend gains amid rate cut hopes
By Michele Maatouk
Date: Friday 17 Jan 2025
(Sharecast News) - London stocks had extended gains by midday on Friday as weaker-than-expected retail sales data underpinned rate cut expectations.
The FTSE 100 was up 1.1% at 8,487.64.
Figures released earlier by the Office for National Statistics showed that retail sales fell 0.3% on the month in December following a downwardly-revised 0.1% increase in November. Economists were expecting a 0.4% jump.
ONS senior statistician Hannah Finselbach said: "This was driven by a very poor month for food sales, which sank to their lowest level since 2013, with supermarkets particularly affected."
The ONS said falls in supermarkets were partly offset by a rise in non-food stores, such as clothing retailers, which rebounded from falls in recent months.
For the fourth quarter, sales volumes fell by 0.8% compared with the third quarter, but rose by 1.9% versus the same period a year earlier.
The retail sales figures rounded off a trio of disappointing releases from the ONS this week. On Thursday, data showed the economy grew 0.1% in November following contractions of 0.1% in October and September. This was below expectations of 0.2% growth, however.
On Wednesday, it was revealed that UK inflation unexpectedly eased in December after two months of increases.
Consumer price inflation rose 2.5%, down from 2.6% in November, and versus expectations for it to remain unchanged.
Meanwhile, core inflation - which excludes food and energy - declined to 3.2% from 3.5%, versus expectations for a smaller drop to 3.4%.
Services inflation eased to 4.4% in December from 5% the month before. Economists were expecting 4.8%.
Kathleen Brooks, research director at XTB, said the market is now predicting a 91% chance of a rate cut from the Bank of England next month, versus a 73% chance at the start of the week.
"The interest rate futures market is also on the way to pricing in nearly three rate cuts from the BOE this year, earlier this week there had been less than two cuts priced in," she said.
"As we mentioned, the market appears to be moving closer to the BOE's expectation of four rate cuts in 2025."
In equity markets, Smiths Group jumped to the top of the FTSE 100 as US activist investor Engine Capital called on the diversified engineer to explore a breakup.
In a letter sent to the board, Engine Capital - which holds a 2% stake in Smiths - said the company should launch a strategic review.
"We believe that Smiths has significant value that is currently unrealised due to its conglomerate structure, and that it is time for the board to announce a strategic alternatives process to maximise value for shareholders," it said.
Engine Capital said a sale of the entire company or its four business could deliver a significant premium to the current share price.
Ladbrokes owner Entain rose after William Hill and 888 owner Evoke said that FY24 EBITDA was set to be at the high end of guidance and "well above" market expectations after a strong performance in the fourth quarter.
Rio Tinto and Glencore were in focus following reports the two miners have been discussing a potential merger. According to Bloomberg News, which cited people close to the matter, discussions were at an early stage but it was unclear whether these talks were still ongoing.
According to sources cited by the Financial Times, talks were held as recently as October.
Ninety One advanced as it said third-quarter assets under management rose to £130.2bn as at the end of the December from £127.4bn at the end of September.
Big Yellow was also in the black even as the self-storage group delivered a cautious outlook on trading reporting a drop in occupancy levels over the third quarter, and said it plans to cut jobs as it deals with higher National Insurance payments to employees from April.
Market Movers
FTSE 100 (UKX) 8,487.64 1.14%
FTSE 250 (MCX) 20,561.51 0.16%
techMARK (TASX) 4,690.98 0.55%
FTSE 100 - Risers
Smiths Group (SMIN) 1,857.00p 5.21%
Spirax Group (SPX) 7,260.00p 4.84%
Entain (ENT) 656.80p 4.25%
Antofagasta (ANTO) 1,802.00p 3.68%
Anglo American (AAL) 2,544.50p 3.43%
Glencore (GLEN) 381.85p 3.19%
Croda International (CRDA) 3,299.00p 2.97%
Prudential (PRU) 641.40p 2.66%
Ashtead Group (AHT) 5,294.00p 2.12%
Reckitt Benckiser Group (RKT) 4,990.00p 2.07%
FTSE 100 - Fallers
Fresnillo (FRES) 664.50p -2.35%
Smurfit Westrock (DI) (SWR) 4,271.00p -1.07%
Vodafone Group (VOD) 69.14p -0.52%
Marks & Spencer Group (MKS) 335.10p -0.27%
3i Group (III) 3,729.00p -0.13%
Severn Trent (SVT) 2,494.00p -0.08%
Auto Trader Group (AUTO) 795.60p -0.05%
London Stock Exchange Group (LSEG) 11,790.00p 0.00%
Airtel Africa (AAF) 124.00p 0.00%
Haleon (HLN) 369.70p 0.00%
FTSE 250 - Risers
Ninety One (N91) 152.70p 4.45%
Aston Martin Lagonda Global Holdings (AML) 106.40p 4.31%
Big Yellow Group (BYG) 904.00p 3.79%
Discoverie Group (DSCV) 684.00p 3.48%
Ferrexpo (FXPO) 104.20p 2.76%
Wizz Air Holdings (WIZZ) 1,312.00p 2.26%
Indivior (INDV) 971.50p 1.99%
Raspberry PI Holdings (RPI) 703.50p 1.96%
Harbour Energy (HBR) 296.40p 1.89%
Spectris (SXS) 2,704.00p 1.88%
FTSE 250 - Fallers
Pollen Street Group Limited (POLN) 802.00p -2.91%
North Atlantic Smaller Companies Inv Trust (NAS) 3,680.00p -2.90%
Watches of Switzerland Group (WOSG) 511.00p -2.29%
Hochschild Mining (HOC) 223.00p -2.19%
Bloomsbury Publishing (BMY) 626.00p -2.19%
Herald Investment Trust (HRI) 2,445.00p -2.00%
Jupiter Fund Management (JUP) 75.20p -1.96%
Wetherspoon (J.D.) (JDW) 593.50p -1.90%
Just Group (JUST) 155.00p -1.90%
Oxford Nanopore Technologies (ONT) 144.60p -1.83%
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