London close: Stocks finish higher as rate cut hopes grow

(Sharecast News) - London stocks ended the week on a strong note, as weaker-than-expected retail sales date helped to fan the flames of rate cut hopes.

The FTSE 100 index jumped 1.35% to close at 8,505.22 points, while the FTSE 250 added 0.34% to settle at 20,597.42 points.

In currency markets, sterling was last down 0.51% on the dollar to trade at $1.2177, as it slipped 0.32% against the euro, changing hands at €1.1842.

"Asset allocation away from overvalued US mega stocks into lower price-earnings ratio European shares amid a weak euro and sterling have propelled the DAX 40 and FTSE 100 to new record highs," said IG senior technical analyst Axel Rudolph.

"The German stock index has seen three all-time highs this week with the FTSE 100 joining it as it exceeds its May peak.

"The Euro Stoxx 50 and 600 are close on their heels and may soon also hit record highs as the IMF revises its global growth forecast upwards ahead of president-elect [Donald] Trump's inauguration on Monday."

Rudolph also points to fresh US economic data, noting that housing starts soared by more than 15% in their biggest surge since March 2021, while building permits decreased slightly but beat expectations, leading to more strong gains on Wall Street.

"US industrial output growth at a 10-month high also contributed to the positive sentiment."

Retail sales unexpectedly decline, eurozone inflation climbs to five-month high

In economic news, UK retail sales unexpectedly declined by 0.3% in December, according to fresh data from the Office for National Statistics.

That followed a downwardly-revised 0.1% increase in November and defied economists' expectations for a 0.4% improvement.

While supermarket sales fell, non-food retailers such as clothing stores saw a rebound, partially offsetting the decline.

Quarterly data showed sales volumes dropped 0.8% compared with the prior quarter, although they were 1.9% higher than the same period in 2023.

"Overall, today's release is further evidence that the economy had very little momentum at the end of last year and, at the margin, increases the downside risk to our forecast that the economy avoided a contraction in the fourth quarter and GDP flatlined," said Alex Kerr, UK economist at Capital Economics.

"But looking ahead, we doubt the economy's recent malaise will continue.

"We expect real household disposable income growth of around 2.3% and improving consumer confidence in 2025 to drive an acceleration in overall consumer spending growth from 1.0% in 2024 to 1.6% in 2025."

On the continent, inflation across the eurozone climbed to a five-month high in December, with the annual consumer price index rising to 2.4%, as confirmed by Eurostat.

Energy price trends drove the uptick, while core inflation, excluding volatile items, held steady at 2.7% for the fourth consecutive month.

Analysts expected inflationary pressures to ease in the coming months.

"While energy prices rose only modestly in the final months of 2024, annual price growth turned marginally positive in December after hitting -6% in September," said analysts at Oxford Economics.

These unfavourable base effects in energy prices were predicted to "reverse in early 2025, supported by some cooling in services inflation", they added.

Further afield, China's economy outperformed expectations in the final quarter of 2024, expanding by 5.4% as government stimulus measures took effect.

That brought annual GDP growth to 5.0%, matching Beijing's target but slowing from a revised 7.4% in 2023.

December retail sales rose 3.7% year-on-year, while industrial output increased by 6.2%, both surpassing forecasts.

However, challenges remained, with subdued consumer sentiment and a 10.6% drop in real estate investment weighing on broader activity.

The International Monetary Fund meanwhile raised its 2025 growth forecast for the UK to 1.6%, citing higher investment, improved household finances, and expected interest rate cuts by the Bank of England.

However, it downgraded growth projections for the eurozone and Germany, pointing to weaker-than-expected momentum and geopolitical tensions.

The IMF also warned that incoming US president Donald Trump's proposed tax cuts and tariffs could heighten global risks, potentially spurring higher interest rates and disrupting trade flows.

Global growth was expected to remain below pre-pandemic levels at 3.3% this year and next.

Smiths Group rises on breakup call, Rio Tinto and Glencore in focus

On London's equity markets, Smiths Group rose 3.13% following a call from US activist investor Engine Capital for the company to consider a breakup.

Engine Capital, holding a 2% stake in Smiths, suggested that the conglomerate structure undervalued the company, and that exploring strategic alternatives could unlock significant shareholder value.

Smiths acknowledged the feedback, emphasising its commitment to creating shareholder value

Ladbrokes owner Entain saw its shares climb 5.3% after Evoke, the parent company of William Hill and 888, said that its full-year 2024 EBITDA was expected to be at the high end of guidance and "well above" market expectations, following a strong fourth-quarter performance.

Mining giants Rio Tinto and Glencore experienced share price increases of 2.16% and 3.38%, respectively, amid reports of early-stage merger discussions.

If realised, such a merger would create the world's largest mining company, surpassing Australian firm BHP.

However, both companies declined to comment on the reports, and the current status of the talks remains uncertain.

Asset management firm Ninety One's shares advanced by 3.69% after reporting an increase in third-quarter assets under management, rising to £130.2bn at the end of December from £127.4bn at the end of September.

Self-storage operator Big Yellow Group rose 3.39% despite reporting a drop in occupancy levels over the third quarter.

The company also announced plans to reduce its workforce in response to higher National Insurance payments to employees starting in April.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,505.22 1.35% FTSE 250 (MCX) 20,597.42 0.34% techMARK (TASX) 4,696.14 0.67%

FTSE 100 - Risers

Entain (ENT) 669.60p 6.29% Smiths Group (SMIN) 1,862.00p 5.50% Spirax Group (SPX) 7,270.00p 4.98% Prudential (PRU) 655.60p 4.93% Anglo American (AAL) 2,548.00p 3.58% Croda International (CRDA) 3,307.00p 3.21% Beazley (BEZ) 846.00p 3.17% Taylor Wimpey (TW.) 114.25p 2.88% Glencore (GLEN) 380.15p 2.73% Ashtead Group (AHT) 5,324.00p 2.70%

FTSE 100 - Fallers

JD Sports Fashion (JD.) 85.04p -2.66% Fresnillo (FRES) 666.00p -2.13% Marks & Spencer Group (MKS) 334.50p -0.45% Auto Trader Group (AUTO) 793.60p -0.30% London Stock Exchange Group (LSEG) 11,770.00p -0.17% Airtel Africa (AAF) 124.00p 0.00% RELX FINANCE BV 3.375% GTD NTS 20/03/33 (BW73) 99.72p 0.00% Compass Group (CPG) 2,675.00p 0.07% Vodafone Group (VOD) 69.58p 0.12% Severn Trent (SVT) 2,500.00p 0.16%

FTSE 250 - Risers

Big Yellow Group (BYG) 932.00p 7.00% Ferrexpo (FXPO) 108.40p 6.90% Aston Martin Lagonda Global Holdings (AML) 108.60p 6.47% Discoverie Group (DSCV) 694.00p 4.99% Carnival (CCL) 1,913.00p 4.76% Quilter (QLT) 154.80p 4.67% Safestore Holdings (SAFE) 624.00p 4.61% Ninety One (N91) 151.60p 3.69% Wood Group (John) (WG.) 68.40p 3.40% Harworth Group (HWG) 170.50p 3.33%

FTSE 250 - Fallers

Pollen Street Group Limited (POLN) 792.00p -4.12% Bakkavor Group (BAKK) 143.00p -4.03% Herald Investment Trust (HRI) 2,400.00p -3.81% Hochschild Mining (HOC) 220.50p -3.29% W.A.G Payment Solutions (WPS) 84.00p -3.23% Bridgepoint Group (Reg S) (BPT) 358.40p -3.14% The Renewables Infrastructure Group Limited (TRIG) 81.00p -3.11% Jupiter Fund Management (JUP) 74.40p -3.00% Oxford Nanopore Technologies (ONT) 143.00p -2.92% North Atlantic Smaller Companies Inv Trust (NAS) 3,680.00p -2.90%