In a week of volatile trading, the FTSE 100 index closed slightly lower on Friday, despite a batch of encouraging economic data that pointed to a pickup in UK retail sales, consumer confidence, and business activity.
The FTSE 100 ended the week down 0.9%, while the FTSE 250 was flat and the AIM All-Share rose 2.5%. Retail sales volumes unexpectedly rose 0.4% in December, following a 0.1% fall in November, beating forecasts. UK consumer confidence also improved slightly in January, supported by stronger expectations for personal finances over the next 12 months.
Additionally, growth in the UK’s service and manufacturing sectors accelerated in January, with the S&P Global purchasing managers’ composite output index rising to a 21-month high of 53.9. The flash services PMI improved to 54.3, outperforming the consensus of 51.7, while the flash manufacturing PMI climbed to a 17-month high of 51.6.
Deutsche Bank’s chief economist Sanjay Raja said the data suggested “encouraging signs from the UK economy,” with revisions making the outlook “a little brighter.” However, JPMorgan analyst Allen Monks cautioned that the surge in the PMI data may not be sustained, noting a similar spike in August that “reversed sharply.”
The pound rose against the dollar and the euro, supported by comments from Monetary Policy Committee member Megan Greene, who argued that looser monetary policy in the US could push up inflation, warranting a slower withdrawal of policy restrictions in the UK.
Meanwhile, gold and silver prices continued to shine, with the yellow metal hitting another record high and approaching $5,000 per ounce. Oil prices also rose, buoyed by reports that the US threatened to curb the supply of cash for Iraq oil sales.
Looking ahead, the global economic calendar next week includes the Ifo business climate report in Germany and US durable goods orders data. Interest rate decisions are also due in the US and Canada, while the UK corporate calendar features full-year results from Lloyds Banking Group and trading statements from Sage and Antofagasta.
