London open: FTSE boosted by Barclays results; retail sales in focus

Opening Market Report
07:13, 23rd October 2020

(Sharecast News) - London stocks rose in early trade on Friday following well-received results from Barclays and better-than-expected retail sales data.
At 0830 BST, the FTSE 100 was up 0.5% at 5,812.46.

Figures released earlier by the Office for National Statistics showed retail sales rose in September for the fifth consecutive month as they continue 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. This marked the largest quarterly increase on record as sales picked up from record-low levels earlier in the year.

Deputy national statistician for Economic Statistics Jonathan Athow said: "Retail sales increased again in September, the fifth consecutive month of growth since the record falls seen at the start of the pandemic.

"Food stores and online retailers have fared particularly well in recent months, and most other store types have now recovered to pre-pandemic levels too after being subject to temporary closures during restrictions in the spring. Spending on home improvement and gardening items in particular have boosted sales.

"Clothing store sales have been slower to recover and fuel sales remain subdued as people continue to work from home and have reduced the amount they travel."

Despite the solid figures, analysts were cautious over the outlook. ING economist James Smith said 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, said: "Following the strong third quarter bounce back, the outlook for retail sales and consumer spending looks more challenging in the near term at least. This reflects increased restrictions on activity, possible markedly rising unemployment, limited earnings and mounting consumer caution."

Investors were also mulling the latest survey from GfK, which showed a slide in consumer confidence in October. GfK's long-running consumer confidence index fell six points to -31, with all five measures of the index down compared to September.

Joe Staton, client strategy director at GfK, said: "There's a worrying threat of a double-dip in consumer confidence as concerns for our personal financial situation and even deeper fears over the state of the UK economy drag the index down six points this month.

"Despite low inflation and rock-bottom interest rates, a buoyant housing market and a raft of Government financial stimulus measures, the prospect of rising unemployment is severely depressing our outlook."

He also noted that "worryingly", the data was collected before the new round of Covid-19 restrictions came into force and the end of the furlough scheme, which will negatively impact the index in the run-up to Christmas and beyond.

Still to come, all eyes will be on Markit's October PMIs for the manufacturing and services sectors, due at 0930 BST.

In corporate news, Barclays was a high riser 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 £1.1bn for the three months to September, compared with £200m a year ago and double analysts' forecasts.

Other banks followed suit, with HSBC, Lloyds and Standard Chartered all higher.

Kainos was in the black after an upgrade to 'buy' from 'hold' at Berenberg, which said the software company's half-year trading update pointed towards "extraordinary strength" across the business. "Such is the strength of the underlying fundamentals that the possible earnings upside could continue to justify a significant premium to peers," it added.

Airtel Africa was in the red after the release of its half-year results, likely knocked lower by a downgrade to 'underweight' at Barclays.

Market Movers

FTSE 100 (UKX) 5,812.46 0.46%
FTSE 250 (MCX) 17,947.92 0.30%
techMARK (TASX) 3,764.55 0.64%

FTSE 100 - Risers

HSBC Holdings (HSBA) 316.05p 2.96%
Barclays (BARC) 107.00p 2.61%
Lloyds Banking Group (LLOY) 28.44p 1.88%
BT Group (BT.A) 102.85p 1.68%
BP (BP.) 204.75p 1.66%
Royal Dutch Shell 'B' (RDSB) 929.50p 1.63%
Vodafone Group (VOD) 110.38p 1.49%
Compass Group (CPG) 1,159.00p 1.22%
Hikma Pharmaceuticals (HIK) 2,607.00p 1.16%
Rentokil Initial (RTO) 543.40p 1.15%

FTSE 100 - Fallers

Evraz (EVR) 372.20p -1.35%
M&G (MNG) 165.30p -1.25%
Hargreaves Lansdown (HL.) 1,394.00p -1.20%
GVC Holdings (GVC) 1,000.00p -1.09%
Avast (AVST) 495.00p -0.84%
Relx plc (REL) 1,624.00p -0.76%
Ferguson (FERG) 7,964.00p -0.72%
Burberry Group (BRBY) 1,474.00p -0.61%
International Consolidated Airlines Group SA (CDI) (IAG) 104.25p -0.57%
Prudential (PRU) 1,068.50p -0.56%

FTSE 250 - Risers

Kainos Group (KNOS) 1,358.00p 4.30%
Carnival (CCL) 1,009.50p 2.97%
Petrofac Ltd. (PFC) 119.40p 2.67%
Renishaw (RSW) 5,820.00p 2.56%
Shaftesbury (SHB) 430.20p 2.43%
PureTech Health (PRTC) 255.00p 2.41%
Playtech (PTEC) 370.00p 2.35%
Drax Group (DRX) 304.20p 2.29%
Morgan Sindall Group (MGNS) 1,196.00p 2.22%
Close Brothers Group (CBG) 1,086.00p 2.16%

FTSE 250 - Fallers

Airtel Africa (AAF) 61.50p -5.09%
Cineworld Group (CINE) 28.00p -4.83%
IP Group (IPO) 79.70p -3.39%
Mediclinic International (MDC) 285.60p -2.12%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 333.00p -1.48%
Energean (ENOG) 533.60p -1.48%
Mitchells & Butlers (MAB) 152.40p -1.42%
3i Infrastructure (3IN) 294.00p -1.34%
LondonMetric Property (LMP) 220.60p -1.08%
Ninety One (N91) 203.80p -1.07%

Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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