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(Alliance News) - The FTSE 100 reversed early falls to close higher on Thursday, buoyed by strong housebuilders which helped offset weak retailers after soft trading at Puma and Primark owner, AB Foods.
The FTSE 100 index rose 20.07 points, 0.2%, at 8,565.20. It earlier set a new intra-day high of 8,572.51.
The FTSE 250 lost 59.91 points, 0.3%, at 20,520.39, and the AIM All-Share ended down just 0.14 of a point at 720.86.
The Cboe UK 100 rose 0.3% at 859.10, the Cboe UK 250 fell 0.3% at 17,914.15, while the Cboe Small Companies leapt 1.7% to 16,033.93.
In European equities on Thursday, the CAC 40 in Paris ended up 0.7%, as did the DAX 40 in Frankfurt.
Stocks in New York were mixed on Thursday. The Dow Jones Industrial Average was up 0.5%, the S&P 500 added 0.1%, while the Nasdaq Composite gave up 0.2%.
Figures in the US showed initial jobless claims increased by more than expected in the most recent week.
According to the Department of Labor in the week that ended on January 18 the advance figure for seasonally adjusted initial claims was 223,000, up by 6,000 from the previous week's unrevised level of 217,000. This was slightly higher than the FXStreet-cited consensus of 220,000.
The four-week moving average was 213,500, up by 750 from an unrevised 212,750.
Versus the dollar, the pound eased to USD1.2343 on Thursday afternoon in London from USD1.2350 on Wednesday. The euro stood at USD1.0409, down from USD1.0417.
Against the yen, the dollar was trading higher at JPY156.02 compared to JPY156.49. The Bank of Japan rate call is due on Friday.
Bannockburn's Marc Chandler said: "There does not appear to be anything preventing the BoJ from hiking tomorrow. The markets are prepared for a quarter-point hike. However, there is some concern that this takes the BoJ out of the game for a bit, and therefore, the move may be seen as a dovish hike."
On the FTSE, retailers were a weak feature after poor trading updates from AB Foods' Primark and Puma in Germany.
AB Foods said group sales fell 2.2% to GBP6.73 billion in the 16 weeks to January 4 from GBP6.89 billion a year prior. At constant currency, however, sales were up 0.5%.
Primark's sales grew 2.0% overall but fell 4.0% in its largest region, the UK, which included a like-for-like sales decline of 6.0%.
UK sales account for around 45% of total Primark revenue.
AB Foods bemoaned "cautious consumer sentiment and a lack of seasonal purchasing catalyst given the mild autumn weather" in the UK.
AB Foods, which closed down 3.0%, said Primark is now targeting low-single digit sales growth in 2025 compared to previous guidance of a mid-single digit rise.
Barclays pointed out AB Foods shares had "travelled very nervously" into the trading statement print so the negative Primark like-for-like was "disappointing although not completely surprising."
AJ Bell's Russ Mould felt the statement could spell trouble for other retailers.
"If Primark is struggling, you know the UK retail sector is in trouble. Shoppers remain cautious about spending and reticence over popping a few cheap tops or jumpers in their basket at Primark suggests times are very hard indeed."
"When Primark says UK sales are weak, you know there has been a change in shopper behaviour. People might still be visiting its stores but they are being more selective and that’s a problem when the business model is built on shifting high volumes of goods," he added.
In Germany, Puma tumbled 23% after it pledged to cut costs after profits and sales fell short in the fourth quarter.
The weak trading weighed on FTSE 100 listed sports retailer JD Sports which fell 1.5%.
Marks & Spencer fell 1.5%, J Sainsbury dipped 0.9% and Tesco declined 1.0%.
Sainsbury announced it will cut more than 3,000 jobs and plans to shut its remaining in-store cafes as part of a major overhaul.
The headcount reduction represents about 2% of the company's current 148,000-strong workforce.
The falls in retail stocks came as a report showed that UK consumer confidence dropped in January, as expectations around the health of the economy deteriorated.
According to BRC-Opinium data, consumer expectations over the next three months of their personal financial situation dropped to minus 4 in January, down from minus 3 in December.
Consumer's expectations of the state of the economy worsened to minus 34 in January, down from minus 27 in December and personal spending on retail fell to minus 9 in January, down from minus 3 in December.
But housebuilders fared better FTSE 100-listed Persimmon, Barratt Redrow and Taylor Wimpey up 3.7%, 2.9% and 2.5% respectively.
On the FTSE 250, Vistry climbed 3.3% and Bellway rose 2.4%.
In a research note, RBC Capital Markets noted the UK Government has entered into a contract with market research firm Verian to evaluate the Help to Buy scheme.
"Whilst this does not mean that Help to Buy is back, it does imply that the Government has started to seriously consider it. We are surprised the Government is potentially turning demand side stimulus so soon; they haven't really given the supply side measures a chance to take effect. Difficult to tell if this is a sign of an increasingly desperate or an increasingly determined Government," analyst Anthony Codling commented.
Codling said all the housebuilders he covers, apart from Berkeley, would be major beneficiaries of a Help to Buy scheme if it operated on similar lines to the previous scheme.
"All the national players have a wide variety of homes which are suitable for first time buyers and all housebuilders tend to follow the market. At Help to Buy's previous peak we believe that around half of the housebuilders' private volumes were sold through Help to Buy," he pointed out.
On the FTSE 250, Inchcape plunged 14% as HSBC downgraded to 'neutral' from 'overweight'.
Brent oil was quoted at USD78.14 a barrel late on Thursday in London, falling from USD78.31 late Wednesday. Gold was little changed at USD2,756.70 an ounce against USD2,757.82 on Wednesday.
Friday's economic calendar sees the Bank of Japan interest rate decision overnight, eurozone consumer confidence data at 1500 GMT and Canadian retail sales figures at 1330 GMT.
The local corporate calendar has a trading statement from luxury goods retailer Burberry.
By Jeremy Cutler, Alliance News reporter
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