Disappointing retail sales and government divisions on Brexit meted out further punishment to the pound today but provided some solace to a stock market worried by US trade and foreign policy.
The FTSE 100 drifted eight points or 0.1% higher to 7,683 with heavy-weight multi-nationals Imperial Brands (IMB) and Royal Dutch Shell (RDSb) making gains of up to 1.6% as weak sterling boosted the value of their dollar earnings.
Extending yesterday’s falls, the pound slid 0.6% to $1.2992 against the dollar, with volatile Westminister politics a factor following Boris Johnson’s speech attacking Theresa May’s Brexit policy yesterday.
The prime minister, who is desperate to avoid a leadership challenge before parliament breaks for the summer, got some good news with Brussels indicating willingness to use her white paper as a basis for talks if she can get it passed by MPs.
‘In a welcome piece of news for UK businesses, negotiators in Brussels signalled they might consider extending the Article 50 Brexit deadline, if a workable deal looked in sight,’ said SpreadEx analyst Connor Campbell.
Also weighing on sterling were weak retail sales, down 0.5% in June as the World Cup kept some shoppers away, although second quarter sales grew 2.1% over the previous three months, the biggest quarter-on-quarter increase in 14 years.
This presents a confusing picture for investors trying to gauge whether the Bank of England will raise interest rates next month.
‘With only a short time to go before the next monetary policy committee meeting, these figures probably won’t change the Bank’s calculations,’ said Tom Stevenson, an investment director at Fidelity International.
‘These will continue to focus on weaker-than-expected inflation and wage growth. An August rate hike is in the balance; whether or not one is delivered, the trajectory thereafter will be extremely shallow,’ he added.
Unilever (ULVR) led the FTSE 100 higher, up 2.2% or 93p to £42.96, after the household goods giant’s second quarter results beat expectations, despite the impact of the recent transport strike in Brazil.
The continued presence in the blue-chip index of Unilever – a key holding of star fund manager Nick Train – is in some doubt after the Anglo-Dutch group announced shareholders would vote in October on a plan to move its headquarters to Rotterdam.
‘The group sales growth was mostly driven by volume growth rather than price increases, this has been the issue for several quarters and something management would like to improve upon,’ said Helal Miah investment research analyst at the Share Centre.
‘It also felt the impact of currency movements but overall group sales and the performance of individual divisions were good, while its key sales to emerging markets saw stronger growth,’ Miah said.
WPP (WPP) was the biggest FTSE faller, down 3.5% or 41p to £11.34, as the advertising group – now without founder Martin Sorrell – responded to French rival Publicis reporting a 2% drop in second quarter sales.
Outside the FTSE 100, Moneysupermarket (MONY) was the day’s biggest riser, jumping 5.6% or 24p to 333p after the price comparison website grew revenues by 6% in the second quarter with analysts saying its strategy of personalising its services appearing to be working.
Aviva Investors, one of the company’s biggest shareholders, was happy. ‘Today’s results from Moneysupermarket.com show healthy growth across all their business lines, with them particularly benefiting from consumers eager to switch to the most competitive energy offering as suppliers continue to raise prices.
‘These figures also confirm that CEO Mark Lewis’ reinvestment strategy is on track and delivering,’ said Trevor Green, head of UK institutional equity funds.
Babcock International (BAB) was the biggest faller, dropping 9.2% to 328p after it cut revenue targets. In a trading statement ahead of its AGM, the defence group said it now expected to see low single-digit underlying revenue growth this year, not ‘low mid-single digit’ growth as defence spending was hit by restructuring and delays.
Laith Khalaf of Hargreaves Lansdown said the strategic investment in Debenhams had cost Sports Direct dearly but the retailer was relatively well placed. ‘Things are of course challenging in retail right now, but Sports Direct is the last man standing on the high street in its particular market, which puts it in a strong position.
‘A good showing from the England football team in the World Cup should also have helped to boost coffers in recent weeks,’ he said.