LONDON MARKET COMMENT: Stocks Close Up; Pound Boosted By Retail Sales

LONDON (Alliance News) - London stock indices closed higher Thursday, having traded within a tight range for most of the session on another busy day of corporate news, while the pound was lifted against other major currencies after UK retail sales beat expectations.

The FTSE 100 closed up 0.1% at 7,013.47, the FTSE 250 closed up 0.1% at 18,154.55, and the AIM All-Share ended up 0.1% at 763.42.

In Europe, the CAC 40 in Paris closed up 0.2% and the DAX 30 in Frankfurt ended up 0.1%. After the close of London equity markets the DJIA was up 0.1%, while the S&P 500 was up 0.3% and the Nasdaq Composite was up 0.4%.

UK retail sales recovered at a faster-than-expected pace due to clothing demand in April, providing support to economic growth at the start of second quarter. The Office of National Statistics said that the volume of retail sales expanded 1.2% month-on-month, reversing a 0.7% fall in March, marking the fastest pace of growth since November and higher than the 0.4% rise forecast by economists. Sales excluding auto fuel increased 1.2% after a flat reading in March, beating economists' expectations for a 0.2% rise.

"This comes just two days after it was confirmed that in the same month the UK economy fell into deflation for the first time since 1960. As a result, the pound has made back its entire losses since Tuesday against the US dollar. The pound's strength is even more apparent against currencies where the central bank is more dovish that the Fed, such as the euro and yen," said Fawad Razaqzada, technical analyst at FOREX.com

The pound hit a high against the dollar of USD1.5700, while it rose to EUR1.4101, its highest level since mid-March. The pound also hit its highest value against the Japanese yen since September 2008 at JPY190.02.

In the US, the dollar fell against other major currencies after jobless claims climbed to 274,000, an increase of 10,000 from the previous week's unrevised level of 264,000. Economists had expected jobless claims to show a more modest increase to about 270,000. However, continuing claims, a reading on the number of people receiving ongoing unemployment assistance, fell to its lowest level in well over fourteen years. Continuing claims dropped to 2.2 million in the week ended May 9th from the preceding week's revised 2.2 million, hitting their lowest level since November of 2000.

The Federal Reserve Bank of Philadelphia's Manufacturing Business Outlook Survey revealed that regional manufacturing activity unexpectedly increased at a slower rate in May. A report released by the Philly Fed on showed that its diffusion index of current activity dipped to 6.7 in May from 7.5 in April. While a positive reading indicates continued growth in regional manufacturing activity, economists had expected the index to inch up to 8.0.

On the London stock markets, Marks And Spencer Group, up 1.7%, and Vodafone Group, up 1.5% both closed amongst the best FTSE 100 performers after broker upgrades.

Barclays upgraded Marks & Spencer Group to Overweight from Equal Weight saying it recognises a benign margin and returns outlook for the next three years, while Nomura upgraded Vodafone to Neutral from Reduce, saying the company's mediocre performance may influence the board to consider alternative routes for value creation, especially after comments from Liberty Global Chairman John Malone about a potential combination.

In the FTSE 250, Booker Group closed as the best performer, up 12%, after it said it will buy the Londis and Budgens convenience store chains and it reported growth in profit in its recently-ended financial year. The company said it will purchase Musgrave Retail Partners GB Ltd, which comprises Londis and Budgens, from Irish food wholesaler Musgrave Group PLC for GBP40 million in cash.

Qinetiq Group, up 11%, reported a higher pretax profit for its last financial year after the previous year was hit by a big impairment, while revenue fell as it continued to be hit by the withdrawal of US military from Afghanistan.

Electrocomponents was the worst-performing stock in the FTSE 250, closing down 6.1%, as it announced that Finance Director Simon Boddie will be stepping down at the end of the first half of its current financial year, and posted a decline in pretax profit for its recently-ended financial year due to continued declines in the UK. It said that its performance had been "disappointing", with investments not yet delivering an expected step-up in revenue growth and its UK business remaining in decline.

Dairy Crest Group ended down 6.0% as it reported a huge fall in profit in its recently-ended financial year as it booked various costs relating to investments and disposals, and as revenue fell due to further struggles in its Dairies and its Spreads And Butter businesses.

In the economic calendar Friday, German gross domestic product data for the first quarter are released at 0700 BST, with German IFO readings for May due shortly after at 0900 BST. Italian industrial sales figures for March also are published at 0900 BST, ahead of UK public net borrowing information at 0930 BST.

In the afternoon, focus will shift to the release of US consumer price inflation information for April, which is set to come out at 1330 BST.

Additionally, there are a raft of speeches from central bankers from around the world Friday. European Central Bank President Mario Draghi is due to give his first speech of the day at 0900 BST, with Bank of England Governor Mark Carney, Bank of Japan Governor Haruhiko Kuroda and Draghi also all expected to speak at 1430 BST. US Federal Reserve Chair Janet Yellen, meanwhile, is scheduled to speak at 1800 BST.

In the UK corporate calendar, water utility Severn Trent releases full-year results, as does Sirius Real Estate and Quintain Estates & Development. Close Brothers Group issues a third quarter interim management statement.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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