FTSE 100 analysis: UK retail sales grow at slowest pace in 7 months

FTSE 100 falls

The FTSE 100 is adding to the losses we saw yesterday and is down 0.1% this morning.

That comes as markets digest a flurry of data. In the UK, British retail sales rose at their slowest pace in seven months during May as consumers continue to feel the pressure from inflation and rising interest rates.

In Australia, the RBA raised interest rates by 25bps to take interest rates to their highest level in 11 years as the central bank warned more tightening may be necessary to bring inflation down to desired levels. The Nikkei managed to climb higher overnight in what was otherwise a muted session in Asia.  

Meanwhile, markets are pricing in 74% chance that the Federal Reserve will press pause at its upcoming meeting this month and leave interest rates unchanged. We discovered late yesterday that the US services sector barely grew in May as the number of new orders being placed slows, supporting the view that the Fed’s existing actions are helping stem inflation.

FTSE 100 analysis: Where next for the UK 100?

We saw the UK 100, which tracks the performance of the FTSE 100, test the 7,622 ceiling yesterday that has been in play on several occasions since early 2022 before losing some ground, suggesting this remains the immediate upside target for the index. The fact it has unsuccessfully tried to move above here three times in the past week suggests it is a tough level to crack. A sustained move above here would allow it to target the 7,110 level of support that held firm for most of May (with a potential mid-level rise to 7,660 worth watching).

On the downside, the index could slide toward the June-trough of 7,452 if it remains under pressure, which must hold to avoid bringing the 2023-lows onto the radar.

Top UK stock news

Retailers like Next, Marks & Spencer Group, AO World, Currys, JD Sports and B&M European Retail Value are on the radar after British retail sales growth slowed to a 7-month low in May, according to data out from the British Retail Consortium. Spending in stores rose 3.9% year-on-year, slowing from the 5.2% rise we saw in April. Food was the only area where spending rose as higher prices continue to bite, suggesting there is a pullback in spending on other categories. Notably, we will have retail sales data out from the euro area later this morning, which will show how retailers over the Channel are performing.

Meanwhile, Associated British Foods – the food maker that also owns Primark – said it has agreed to buy National Milk Records for 215 pence per share, giving the business a £48 million valuation. AB Foods is down 0.2% this morning.

Unilever is down 0.4% on news it is looking for a replacement for chairman Nils Andersen, according to unnamed sources speaking to Bloomberg. That comes as the consumer goods giant prepares to welcome Hein Schumacher as its new chief executive in July and as it looks for a new chief financial officer ahead of Graeme Pitkethly’s retirement next year. The report said it is looking to change chair following a run of missteps that have fuelled investor frustration.

Standard Chartered is up 0.5% on news it is in advanced talks about selling its aviation finance business to a jet lessor named AviLease that is own by Saudi Arabia’s Public Investment Fund, according to unnamed sources speaking to Bloomberg. The business could be worth at least EUR3.5 billion but no deal is guaranteed.

British American Tobacco is up 1% as it reiterated hopes for its next-generation products to be profitable in 2024 and achieve £5 billion in annual sales by 2025 in a trading update today, with CEO Tadeu Marroco making it clear that the tobacco giant will not be changing its strategy. However, he admitted that its traditional tobacco business is suffering from operational issues in the US, where it is now working on reviving demand, while its glo next-gen product has an ‘underwhelming start to 2023’. He also said that BAT is continuing to deleverage its balance sheet, which should support shareholder returns. ‘2023 is going to be complex and exciting in equal measure,’ said Marroco. BAT reiterated its full year guidance.

GSK is up 0.1% after applying for a licence to use Jemperli in combination with chemotherapy to treat adults with certain types of advanced or recurrent endometrial cancer. The company said it would be the ‘first meaningful frontline treatment’ advancement in decades if it is approved by the US Food & Drug Administration, which has given priority review for the application and is set to make a decision by September 23 after designating it as a Breakthrough Therapy.

BP and Shell are both down 0.5% today as the boost provided Saudi Arabia’s 1 million barrel per day production cut has already lost steam as concerns over global demand grow, with brent down 0.2% today.

Chemring is up 4.5% after reporting sharp falls in sales and profits in the six months to the end of April as delays to its order intake pushed more work later into this year. Revenue was down 4% to £212.2 million and underlying pretax profit was down 23% at £25.6 million. Its order book performed much better and rose 82% to hit record levels. Chemring said its performance will be second-half weighted and that 90% of its work is already booked-in. The interim dividend was raised 21% to 2.3p.

Paragon Banking Group is up over 8% today after it doubled the size of its share buyback programme to £100 million and raised its interim dividend by 17% to 11.0p as it released first half results this morning. The company said underlying profit rose 22.2% in the six months to the end of March to £128.9 million, although this plunged almost 68% on a reported basis as fair value gains booked the year before unraveled. Its net interest margin continued to grow to 2.95%, toward its 3% goal for the full year.

Team17 is up 1.5% after appointing Steve Bell as its chief executive officer. Bell will join the board as CEO-designate on September 4 before taking over at the start of 2024, when existing CEO Debbie Bestwick will leave. Bell joins from marketing agency Worldwide Holdings, which he co-founded in 1999.

Genuit Group is down 1% after it said chief financial officer Paul James is resigning after five years in the role in order to join a privately-owned company. He will remain in his position until the end of September, with the board searching for his replacement in the meantime.

Anglo American has been raised to Outperform from Sector Perform by RBC Capital Markets, which has a price target of 2,700p on the mining behemoth. The stock is up 0.5% at 2,425p this morning.

Burberry has been upgraded to Hold from Reduce by HSBC, which has a price target of 2,200p on the luxury goods firm. The stock is up 1.2% at 2,196p today.

Dr Martens has been cut to Hold from Add by Peel Hunt, which has a price target of 150p on the bootmaker. The stock is down 2.6% at 130.6p today.

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