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FTSE rallies as Tesco sparks retail resurgence

Better-than-expected sales figures from Tesco spark hopes for UK retail sectors, driving FTSE 100 rally

FTSE rallies as Tesco sparks retail resurgence

Retail stocks have led a FTSE 100 rally after better-than-expected sales figures from Tesco (TSCO) sparked hopes for the beleaguered UK high street.

The UK blue-chip index jumped 71 points, or 1%, to 6,883, with retail stocks clustered at the top of the index.

Tesco jumped 3.5% to 209.5p, as figures from market researchers Kantar Worldpanel showed sales at the UK's biggest retailer rose 0.6% in the last 12 weeks of last year, amid an overall 1.6% rise in grocery sales.

That spurred a broader rally in retail stocks, with Next (NXT) up 5.9% at £48.45 and Marks and Spencer (MKS) rising 5.8% to 275.9p.

But Morrisons (MRW) failed to join in, dropping 3.4% to 212.1p after the supermarket reported a 3.6% rise in like-for-like sales in the nine weeks to the end of 6 January, below the 4.1% investors had been expecting.

'These numbers aren’t a bad showing by Morrisons, but they’re shy of being excellent news,' said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.

'It looks like consumers reined in spending during the festive period, and for Morrison that meant a slowdown in sales growth.'

DS Smith (SMDS) and Smurfit Kappa (SKG) also jumped, up 6.3% at 325.4p and 5.8% at £22, respectively, as analysts at Jefferies said the paper packaging sector had been viewed too harshly and could be due a re-rating.

Festive food and drink also buoyed the FTSE 250, as sales for Greene King (GNK) over the two weeks covering Christmas and New Year’s were up 10.9% on the previous year. Shares were up 6.1% at 586.8p.

The gold price slipped 0.6% to $1,280.64 against a strengthened dollar, as US commerce secretary Wilbur Ross predicted trade talks between the US and China could reach a deal that America ‘could live with’.

Optimism over those trade talks also buoyed the oil price, with Brent cruse up 1.4% at $58.15 a barrel.

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