Last week in London
The London market failed to extent its new year rally last week, coming under pressure from a number of disappointing trading updates and renewed oil price strength which took crude up to a six week high.
Quentin Smith at OMAM in the Uk says that data from the British Retail Consortium showed that retailers had their worst December in more than a decade, underlining the view that five interest rate increases and a housing-market slowdown are curbing consumer spending.
Sales fell by 0.4% in December following a 0.2% decline in November, the largest December fall since 1991. The BRC noted that December was not positive despite a last minute Christmas shopping rush and strong trading for many retailers in post-Christmas sales and cited a lack of consumer confidence created by uncertainty over the economy and housing market.
The global economic recovery last year helped bolster overseas demand for products such as cars, petroleum products, chemicals and capital goods, while a 3.2% decline in the value of the pound against a basket of currencies in the second half of the year reduced the price of British products for customers abroad, underpinning exports.
The Bank of England left its benchmark interest rate unchanged at 4.75% for a fifth month after retail sales growth slowed, demand for mortgages waned and manufacturing contracted.
Home loan approvals, an early pointer to the direction of house prices, slumped to the lowest in almost a decade in November, while factory production unexpectedly fell for the fifth month in six in November and declined in the three months to the end of November for the second quarter in a row.
The European Central Bank also left its benchmark interest rate unchanged at 2% for a 20th month to support an economic recovery that is threatened by the euro's appreciation and high unemployment. The interest rate futures market is now pricing in a cut by the end of the year
Over the week the All-Share lost 0.4% as blue chips weakened by 0.7%, while midcaps (+1.2%) and smallcaps (+0.7%) both made gains. The strongest sector gains came from resources and basic industries, while financials and consumer staples were the weakest.
Standard Chartered (-1.7% to 937p), a UK bank that generates two thirds of its profit in Asia, agreed the purchase of Korea First Bank for $3.3bn, its largest ever acquisition, to increase earnings in the region's third largest banking market.
Standard Chartered said it plans a £1bn share placement to fund the acquisition, from buyout firm Newbridge Capital and the South Korean government. The deal will be complete by the end of April.
