(Alliance News) - Stock prices in London were mixed at midday on Friday as the pound breached the USD1.40 mark, hindering the FTSE 100 index after days of flirting with surpassing that round-number barrier.
Sterling is up 2.4% versus the greenback so far this year as investors grow increasingly confident the UK is on the road to economic recovery as the country progresses with its mass-vaccination rollout.
UK Prime Minister Boris Johnson will announce his "road map" for easing lockdown restrictions in England on Monday next week. The UK government is on track to hit its target of giving 16 million people their first dose by mid-February.
The internationally exposed flagship index was essentially flat, down just 0.94 of a point at 6,616.21. The domestic-focused FTSE 250 index was up 30.14 points, or 0.1%, at 20,963.97, and the AIM All-Share index was up 0.2% at 1,209.07.
The Cboe UK 100 index was up 0.2% at 658.13 points. The Cboe 250 was up 0.2% at 18,555.22 and the Cboe Small Companies up 0.2% at 12,788.71.
The CAC 40 index in Paris was up 0.6% and Frankfurt's DAX 30 up 0.5%.
The pound was quoted at USD1.4001 at midday Friday, up from USD1.3955 at the London equities close Thursday, shrugging off dire UK retail sales numbers. Sterling hit an intraday high of USD1.4008 in late morning trade - its highest level since April 2018.
AJ Bell's Russ Mould said: "A strong pound isn't helping the [large-cap] index - crimping the relative value of its dominant overseas earnings in the latest reminder that the multi-national index is in no way a proxy for the UK economy.
"The run for sterling towards the USD1.40 mark against the dollar reflects, in part, optimism about what a rapid vaccine roll-out would mean for reopening in the UK, setting quite high expectations ahead of Boris Johnson's statement on the easing of restrictions on Monday."
In the meantime, UK retail sales plunged in January as tighter nationwide coronavirus restrictions closed non-essential shops, the latest figures from the Office for National Statistics showed.
On an annual basis, UK retail sales fell 5.9% in January having posted growth of 3.1% in December. The print missed market consensus, cited by FXStreet, for just a 1.3% drop.
Retail sales plunged 8.2% month-on-month in January, having risen 0.4% in December. The latest reading was worse than the 2.5% decline expected.
FTSE 100 retailers Kingfisher and B&M European Value Retail - which have massively benefited from stringent lockdown restrictions over the past year - were down 0.8% and 0.5% respectively.
Elsewhere, a reading on the UK private sector's downturn was not as bad as anticipated for February amid confidence in the country's mass-vaccination rollout.
IHS Markit said its February survey of UK companies indicated only a fractional decline in UK private sector output, which contrasted with the sharp reduction seen at the start of the national lockdown in January.
The IHS Markit/CIPS UK services purchasing managers' index jumped to 49.7 points in February, up from 39.5 in January. Though still below the neutral mark of 50 points, the latest reading was well above market expectations, cited by FXStreet, of 41.0 points and was the highest in four months.
UK manufacturing PMI increased to 54.9 points in February, up slightly from 54.1 in January, beating market forecasts of 53.2. The UK composite PMI score rose to 49.8 points in February, up sharply from 41.2 in January and well above market consensus of 42.2.
In the FTSE 100, Segro was up 1.5%. The warehouse property investor raised its dividend after posting positive annual results.
For 2020, pretax profit was GBP1.46 billion, up 62% from GBP902 million in 2019 and adjusted pretax profit was GBP296.5 million, up 11% from GBP267.5 million in 2019.
The company saw a record leasing and asset management performance with GBP77.9 million of new headline rent in 2020, including GBP41.1 million of new pre-let agreements.
The company declared a full-year dividend of 22.1 pence, up 6.8% from 20.7p paid in 2019.
Shares in large-cap banks turned higher, reversing early morning losses, as earnings season for financial services firms rolls on.
NatWest Group was up 1.4%, despite the UK state-backed lender swinging to loss in 2020, as it confirmed it will withdraw from the Republic of Ireland.
For 2020, NatWest posted a swing to pretax loss of GBP351 million from a profit of GBP4.23 billion in 2019. In the fourth quarter alone, NatWest managed a profit, but pretax profit came in 96% lower year-on-year at GBP64 million.
Total income - a measure which includes net interest income as well as non-interest income such as fees - was sharply lower in 2020. Total income fell 24% to GBP10.80 billion from GBP14.25 million. In the fourth quarter alone, it was down 43% to GBP2.42 billion.
For 2020, the lender posted impairment losses amounting to GBP3.24 billion, up sharply from GBP696 million in 2019.
NatWest declared a 3.0 pence per share dividend for 2020, following peer Barclays, which on Thursday offered a 1p dividend plus a share buyback. UK lenders had cancelled final payouts for 2019 under orders from the Bank of England amid the Covid-19 pandemic.
Peers Barclays and Lloyds Banking were 1.1% and 0.1% higher, respectively. Lloyds posts annual results next Wednesday.
NatWest confirmed it will "begin a phased withdrawal" from the Republic of Ireland, a "multi-year process", while remaining in Northern Ireland.
NatWest - formerly known as Royal Bank of Scotland Group - has agreed to sell a EUR4 billion portfolio of performing commercial loans to Dublin-based AIB Group. The sale remains subject to due diligence.
NatWest is also in early talks with Permanent TSB Group Holdings and others about their potential interest in buying other Ulster retail and small and medium enterprise assets.
AIB and Permanent TSB were up 5.1% and 5.5% respectively.
At the other end of the large-caps, oil majors BP, Royal Dutch Shell 'A' and 'B' were down 0.8%, 0.7% and 0.5% respectively, tracking spot oil prices lower.
Brent oil was quoted at USD63.00 a barrel Friday at midday, sharply lower from USD64.49 late Thursday in London.
In the FTSE 250, Future was up 3.5% after the magazine publisher said it benefited from high levels of online engagement in the four months ended January 31 - particularly during Black Friday and Christmas.
Looking ahead, Future forecast that profitability for its financial year ending September 30 will materially exceed expectations. For financial 2020, it posted pretax profit of GBP52.0 million on revenue of GBP339.6 million.
The dollar was weaker across the board after data showed US jobless claims unexpectedly rose by more than expected on Thursday.
The euro was priced at USD1.2141, higher from USD1.2076. Against the yen, the dollar was trading at JPY105.37, lower against JPY105.72.
Analysts at ActivTrades explained: "Having started the week on the front foot, the US dollar is now into its second consecutive session of losses, following the disappointment caused by the latest US employment data, which was published late on Thursday. The state of the US labour market is perhaps a reminder that the country's economy is far from being out of the woods, and that the recent focus on the possibility of fiscal stimulus triggering a rise in inflation, and bringing about a pivot in the Federal Reserves monetary policy, could be premature."
On the European continent, the eurozone's struggling service sector contrasted with a resurgent manufacturing economy, which registered further growth in February.
Markit's flash eurozone composite PMI climbed to a two-month high of 48.1 points in February. Though still below the 50.0 no-change mark, it topped January's 47.8 tally, suggesting the eurozone's private sector decline is easing.
In February, the eurozone's manufacturing sector had its best showing in three years. The manufacturing flash PMI rose to 57.7 in February, a 36-month high, from 54.8 in January.
Problems mounted for the services sector, however, as Covid-19 restrictions continued to take their toll. The eurozone flash services PMI activity index fell to a three-month low of 44.7 points from January's 45.4 points.
Meanwhile, business activity in Germany expanded at the fastest pace in two months amid a rally led by the manufacturing sector, survey results from Markit showed.
The latest purchasing managers' index readings from Europe's largest economy showed a "further divergence" between the manufacturing and services sectors.
Manufacturing surged, while the services sector was hit by Covid-19 restrictions. The flash Germany PMI composite output index improved to 51.3 points in February, a two-month high, from 50.8 in January.
The flash Germany manufacturing PMI roared to a 36-month high of 60.6 points, from the already decent 57.1 points in January. However, the services flash PMI dropped to a nine-month low of 45.9 points in February, from January's tally of 46.7, remaining firmly in contraction territory.
Gold was trading at USD1,774.09 an ounce, down from USD1,776.28 late Thursday, trading at its lowest levels in seven months.
US stock futures edged higher Friday after Treasury Secretary Janet Yellen said a large Covid relief package is still needed for a full recovery.
US President Joe Biden's USD1.9 trillion economic rescue package remains in Congress awaiting passage.
The Dow Jones Industrial Average was called up 0.1%, the S&P 500 up 0.2% and the Nasdaq Composite up 0.4%.
Speaking on CNBC's Closing Bell late Thursday, Yellen said: "It's very important to have a big package that addresses the pain this has caused. The price of doing too little is much larger than the price of doing something big."
In the economic calendar for Friday, the US PMI is out at 1445 GMT.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
Copyright 2021 Alliance News Limited. All Rights Reserved.