(Alliance News) - Stocks in London were called lower on Friday, after data showed UK retail sales fell in February and a survey showed consumer confidence taking a hit in March.
IG says futures indicate the FTSE 100 index of large-caps to open 17.4 points, or 0.2%, lower at 7,449.98 on Friday. The FTSE 100 closed up 6.75 points, or 0.1%, at 7,467.38 on Thursday and is up 0.9% so far this week.
"The coming months set to bring further rises in both inflation and interest rates, it is hard to see how overall consumer spending growth will make much headway over the remainder of this year," analysts at Capital Economics commented.
In early UK corporate news, engineering firm Smiths Group posted an interim earnings improvement and backed annual guidance, while water works United Utilities expects higher annual revenue, but unchanged profit due to cost inflation. DIY retailer Wickes posted annual revenue and profit progress. Gold miner Petropavlovsk, recently deposed from the FTSE indices, warned about the impact of UK sanctions on its Russian lender Gazprombank, and as a result on its ability to sell its gold production.
Smiths said it has seen "accelerated organic growth" in its financial first half, which ended January 31.
Revenue rose 3.7% yearly to GBP1.19 billion from GBP1.15 billion. Pretax profit almost doubled at GBP160 million from GBP84 million.
Smiths noted it saw 3.4% year-on-year organic revenue growth during the half-year.
"Our performance in the first half demonstrates the meaningful progress we are making against our strategy. We accelerated Smiths' organic revenue growth to 3.4% and converted that into even stronger profit and earnings growth, despite supply chain challenges and cost inflation," Chief Executive Paul Keel said.
Smiths raised its interim payout by 5.0% to 12.3 pence per share from 11.7p.
Smiths backed annual guidance for 3% organic growth in revenue. However, it expected a "more challenging aviation original equipment market in the near-term".
United Utilities expects to post a revenue rise for the financial year ending March 31, though underlying operating profit will be "broadly the same".
Increased revenue will be offset by "higher underlying operating costs", driven by price inflation, United Utilities said.
Underlying operating profit in financial 2021 amounted to GBP602 million, on revenue of GBP1.81 billion. Reported pretax profit was GBP551.0 million.
Elsewhere on the London market, Wickes posted double-digit revenue growth, with the DIY retailer benefitting from increased demand driven by the Covid-19 pandemic.
Revenue in the financial year that ended January 1 jumped 14% to GBP1.53 billion from GBP1.35 billion. Pretax profit surged to GBP65.4 million from GBP28.9 million.
Wickes, separated from Travis Perkins back in April of last year, paid an annual dividend of 10.9 per share.
"Favourable consumer trends" and an "ageing housing stock" mean the company is set for a decent 2022, CEO David Wood said.
The results from Wickes come as numbers showed UK retail sales fell on a monthly basis in February, undershooting expectations for an increase.
According to the Office for National Statistics, retail sales declined 0.3% month-on-month in February, following a 1.9% hike in January from December. The figure for February was below FXStreet cited consensus of a 0.6% rise.
Annually, retail sales rose 7.0% in February, slowing from growth of 9.4% in January. FXStreet-cited consensus had forecast a 7.8% yearly rise for February.
February's retail sales volumes are 3.7% above the level of two years earlier, so just before the onset of the pandemic.
The figures from the ONS on Friday come after a long-running tracker showed UK consumer confidence has fallen in March.
GfK's consumer confidence index fell by 5 points to minus 31 in March as consumers confront a "wall of worry" amid 30-year-high levels of inflation.
It is the fourth month in a row that the survey's headline figure has dropped, to a level last seen in October and November 2020 when Covid numbers were rising.
"The coming months are likely to prove disruptive for retailers. The impact felt from the ‘cost of living crisis’ is expected to become particularly acute quite quickly. There is also the effect the conflict in Ukraine is having on certain supply chains, still struggling to recover from the strains of the last two years, and the uncertainty the situation creates for businesses," Lloyds Bank analyst Aled Patchett commented.
Sterling was quoted at USD1.3194 shortly after the retail sales data, up from than USD1.3187 at the London equities close on Thursday.
The euro traded at USD1.1023, up from USD1.1002. Against the yen, the dollar was quoted at JPY121.84, down from JPY122.16.
Back on the London Stock Exchange, Petropavlovsk warned it has a USD200 million term loan and a USD86.7 million revolving credit facility with Gazprombank, a bank which now has been sanctioned by the UK, in the wake of Russia's invasion of Ukraine.
"It is a condition of these facilities and the term loan that Gazprombank acts as an off-taker of 100% of the group's gold production," the Petropavlovsk explained.
Sanctions and asset freezes imposed on Gazprombank currently prevent Petropavlovsk from making further sales of gold to Gazprombank.
"Restrictions on purchasing and selling gold in Russia may make it challenging to find an alternative purchaser for the group's gold output," Petropavlovsk warned.
"The company is urgently considering with its advisers the implications for the group's activities and financing arrangements resulting from GPB being designated for the purposes of an asset freeze. A further announcement will be made in due course. Petropavlovsk reconfirms that none of the companies in the group has to date been named in the sanctions against Russia announced by the United Kingdom, United States, European Union, and other nations."
Elsewhere, transport company Go-Ahead said the UK Department for Transport has handed rail contracts to its Govia Thameslink Railway unit. It will mean GTR continues to operate the Thameslink, Southern and Great Northern rail services, the largest railway network in the UK.
Go-Ahead has a 65% stake in Govia.
The pact begins at the start of April and runs for the three years. There is also an option for a further three years, should government agree.
GTR will earn a fixed yearly management fee of GBP8.8 million, with an additional performance fee of up to GBP22.9 million.
"Subject to the achievement of performance targets set by the DfT, the maximum fee receivable by GTR would therefore be GBP31.7 million per annum." Go-Ahead added.
In Asia on Friday, the Japanese Nikkei 225 index rose 0.1%. In China, the Shanghai Composite was down 1.2%, while the Hang Seng index in Hong Kong wa down 2.5% in late dealings. In Sydney, the S&P/ASX 200 closed up 0.3%.
In the US on Thursday, Wall Street rebounded strongly, with the Dow Jones Industrial Average ending up 1.0%, the S&P 500 up 1.4% and the Nasdaq Composite up 1.9%.
Gold was quoted at USD1,954.34 an ounce early Friday in London, down from USD1,964.88 late Thursday.
Brent oil was trading at USD118.92 a barrel, up from USD118.85.
President Volodymyr Zelensky pressed a NATO summit Thursday to flood weapons into Ukraine, and Western allies responded with new sanctions against Russia, promises of military aid, and discussion of expelling Moscow from the international G20 body.
As battles raged across Ukraine, with television footage showing a large Russian warship ablaze at dockside near the southern city of Mariupol, Zelensky addressed the emergency NATO summit and a G7 leaders' meeting by video link. He said the West should provide "all the weapons we need" to "prevent the deaths of Ukrainians from Russian strikes, from Russian occupation".
Kicking off a day of intense diplomacy, US President Joe Biden made clear that the Western alliance was listening.
Still to come on Friday is the German Ifo index at 0900 GMT.
By Eric Cunha; ericcunha@alliancenews.com
Copyright 2022 Alliance News Limited. All Rights Reserved.
