Disappointing data dents the recent strength in the FTSE
BRITAIN’S top shares went into retreat yesterday after disappointing US retail sales data raised concern over the strength of the economic recovery, prompting a move out of banks and miners into more defensive sectors.
A 0.4 per cent rise in retail sales fell short of the 0.7 per cent increase expected by economists polled by Reuters, reflecting cutbacks in car purchases and online shopping.
“Everybody thought that the US retail sales numbers were going to be very, very good and they were alright, but they certainly weren’t as good as people expected,” Michael Hewson, market analyst at CMC Markets, said.
“It just reinforces the fact that there are quite a significant amount of problems that still need to be resolved – not only in Europe but also in the US economy.”
Moody’s warnings late on Monday that it could downgrade top-rated sovereigns including Britain also left the market on edge, though did not come as too much of a shock, traders said.
Compounding worries, traders warned that fourth-quarter Eurozone GDP data, set for release today, could point to the fact the region is back in recession.
The UK benchmark closed down 5.83 points, or 0.1 per cent, at 5,899.87, having risen 0.9 per cent on Monday after Athens’s approval of austerity measures helped ease fears over a messy default.
Miners and banks, strong gainers on Monday, were the biggest drags on the index, as investors, rattled by the downbeat US data and unconvinced Greece is off the hook, switched into defensive sectors such as drugmakers.
Yet more dire economic figures posted by Greece yesterday made it increasingly difficult to see the country being able to get its deficit under control, with flash estimates showing GDP shrank seven per cent in the fourth quarter of 2011.
“Those that missed the recent rally are reluctant to buy in for fears of an imminent sell off,” Atif Latif, director of equities and derivatives at Guardian Stockbrokers, said. “With sector rotation and defensive buying alongside downside protection being aggressively bought we may have seen the last push up before a correction.”
InterContinental Hotels was among the biggest laggards, off 2.1 per cent. The world biggest hotelier unveiled robust full-year results but broker Charles Stanley cut its rating to “reduce” after a strong run in the shares.
Bunzl, meanwhile, grabbed the top spot on the blue chip leader board, up 3.7 per cent, after JPMorgan hiked its rating for the packaging firm to “overweight” on valuation grounds.
“We believe that the recent relative underperformance could be a good entry point ahead of FY results on 27 February,” JPMorgan said in a note.
Outsourcing group Capita was another good gainer, ahead 2.1 per cent after it said it had been selected as recommended supplier to partner the Ministry of Defence in providing recruitment services for the Army and IT services for the Royal Navy and Royal Air Force.
Meanwhile, the FTSE Small Cap index closed down 0.1 per cent, same as the FTSE 100, while the FTSE 250 fell 0.3 per cent.
Yell Group shed 17 per cent after the Yellow Pages publisher reveals a slightly bigger than forecast 15 per cent fall in third-quarter revenue.
Journey Group jumped 19 per cent after saying its 2011 results are expected to be ahead of current market expectations.