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Last Week in the City

Garry White, chief investment commentator, looks at the market moving events that have shaped the UK equity markets this week (January 8 to 12, 2018).

Garry White

in Features


The FTSE 100 rose 0.8% over the week by mid-session on Friday, hitting a new record. The week was dominated by Christmas earnings reports from retailers, with food sellers the big winners. 


Britain’s manufacturing sector expanded for a seventh-consecutive month for the first time in over 20 years during November, according to industrial production figures published by the Office for National Statistics.

Bond markets wobbled after reports China would reduce or even halt buying US Treasuries, in a move believed to be in response to suggestions that US President Donald Trump was going to get tough on trade with the country. However, Chinese authorities cast doubt on the speculation.

Germany’s economy expanded by 2.2% last year — the highest rate since 2011.

Chinese Premier Li Keqiang said the country’s economy performed better than forecast in 2017 and he expects annual gross domestic product growth of around 6.9% this year, according to state media.

The short-term outlook for global sovereign and corporate borrowers is at its healthiest level in a decade, according to Fitch, but the ratings agency warned that rising interest rates and political uncertainty will threaten credit quality over the longer term.

John Redwood, Charles Stanley’s chief global strategist, asks whether government bonds represent a good investment here.


Nigel Farage, former leader of the UK Independence Party, said that he is nearing the opinion that the UK should hold a second referendum on its EU membership. However, he backtracked on this idea the following day.

London is likely to be spared the worst economic effects of leaving the EU because its dynamic industries are more resilient to change, a new report for London mayor Sadiq Khan concluded. The rest of the UK will be hit harder than London.


A whole raft of retailers shared their Christmas updates. In general, food sales were strong, with discounters and those with a solid internet offering winning. More traditional businesses, particularly department stores, saw more difficult trading.

Shares in Marks & Spencer fell by almost 6% after its festive update showed a slide in sales at its clothing and food arms. For the last few years, sales of food have been strong and have made up for its weak general merchandise arm. However, its food operations now appear to be stuttering too.

Tesco, Britain's biggest retailer, missed market forecasts for Christmas trading, sending its shares down by almost 3% in early trading. This was particularly disappointing after rivals Wm Morrison and J Sainsbury managed to beat City forecasts earlier in the week. The group was hit by the demise of Wholesaler Palmer & Harvey, which hit the supply, and therefore sales, of tobacco products in its supermarkets.

Discount supermarket Lidl had a record Christmas in the UK, with sales up 16% year-on-year. Management said the supermarket saw its strongest trading week in UK history in the week before Christmas, with a record trading day on the Friday December 22.

Shares in children’s goods retailer Mothercare lost more than a quarter of their value after management warned on profits following a “challenging” festive sales period.

Card Factory shares slumped by more than a fifth after it warned profit margins would be hit by inflationary pressure from the weak pound and wage inflation. “We anticipate that the combined impact of foreign exchange and wage inflation in FY19 will result in £7m-£8m of additional costs,” said chief executive Karen Hubbard.

Internet clothing retailer Boohoo.Com raised its full-year guidance for the second time this year after sales over the Christmas period doubled. Management now expect full year sales will rise 90% compared with its pervious guidance of 80%.

Moss Bros shares slumped around 9% after the menswear group said fewer people visited its stores than it had expected in December. This means full-year profits will be lower than City analysts had expected, and would now be between £6.5m and £6.8m. This is lower than last year’s £7.1m.

Ted Baker shares rose almost 6% after the retailer announced upbeat Christmas trading. In the eight weeks to January 6, retail sales were up 9%, with e-commerce sales rising 35%. Internet sales now make up 30.1% of total retail sales.

Fashion brand Superdry posted interim results that were in line with market expectations. The company remains confident it will deliver full-year underlying pre-tax profit income tax in line with the £97.7m to £100.6m currently forecast by analysts. It shares fell by around 3% after rising sharply ahead of the statement.


Blue chip GKN rejected an “opportunistic” approach from midcap turnaround specialist Melrose Industries, which valued the company at £7bn. Instead, GKN said it would break itself up, separating the aerospace and automotive divisions into two companies.


Oil prices rallied for a fourth week, moving close to a three-year high as a global surplus recedes. US oil stock fells slightly below their five-year average. Brent crude prices rose 2.4% over the week by mid-session on Friday, sitting at around $69.20 a barrel.     

Tullow Oil shares rose after the group said it was producing crude oil at better than expected rates from a new project in the North Sea. The shares hit a 12-month high.


Shares in midcap Ultra Electronics jumped after the company said it would have "significant" exposure to a rising US defence budget while demand grows for advanced defence technologies.


Taylor Wimpey, the UK’s third largest housebuilder, said the UK housing market remained “solid”, despite wide economic uncertainty. In a trading statement released ahead of its full-year results, management said the average sale price of its homes last year rose 4% to £264,000.

In a trading update, Persimmon reported a sharp jump in sales, putting it on course to beat profit expectations for 2017. Revenues in 2017 rose 9% year-on-year.

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