- Pound remains below $1.25 after UK retail sales fall again in January
- FTSE 100 struggles as mining stocks weigh
- Dollar wallows near one-week low as policy concerns limit bounce
- UK retail sales fall in January, prices rise at fastest pace since mid-2013
- Hong Stocks fall as investors lock in profits
- Shares in Unilever spike after Kraft confirms merger talks with Unilever
Bid excitement props up the FTSE
The FTSE 100 bucked the trend in Europe, closing higher, as its peers floundered. The blue chip index enjoyed a boost after Kraft confirmed merger talks with Unilever, propelling the stocks to a record high.
In Europe, shares retreated as commodity-related stocks weighed.
At the closing bell:
- FTSE 100: +0.19pc
- DAX: -0.11pc
- CAC 40: -0.78pc
- IBEX: -0.69pc
Chris Beauchamp, of IG, said:"Big ticket M&A has enlivened up an otherwise relatively dull afternoon, as Kraft makes a bid for Unilever. For now the approach has been rebuffed, and in relatively robust language from the tone of Unilever’s response. Until today Unilever shares had steadily underperformed the FTSE 100 over the past six months, left behind by more glamorous sectors such as mining, but today has seen that situation reverse.
"Backed by Warren Buffett, Kraft is likely to return for another tilt at the prize, with a bid of this size unlikely to have been made without careful consideration. Unilever’s surge put the fight back into the FTSE 100, but aside from Unilever the honours are evenly split between risers and fallers. With US earnings season out of the way and the monthly options expiry done and dusted equity markets looked poised for more losses."
Kraft Heinz Unilever: A marmite deal?
Mike van Dulken, Head of Research at Accendo Markets, questions whether a Kraft Heinz - Unilever tie-up would be a marmite deal:
"We’re blessed with a whirlwind of exciting M&A news at the moment. At the risk of being a party pooper, however, I have reservations about the latest between Kraft-Heinz and Unilever. Yes the latter has rejected a merger offer, but that’s par for the course in takeover negotiations. Rarely is a first approach accepted. If someone is that interested, they’ll be back with a better offer. Which Kraft may well do, as it says it wants to “work towards an agreement” and especially with a mere 18% premium offered being well shy of the 30% average for big deals over the last few years. A 14% Unilever share price jump to fresh all-time highs is thus understandable today, on hopes of a better deal being forthcoming before a 17 March (5pm) ‘put up or shut up’ deadline according to UK takeover rules.
It's definitely a Marmite deal. Kraft loves it, Unilever hates it.— James Mackintosh (@jmackin2) February 17, 2017
"US giant Kraft Heinz has made a merger offer to fellow consumer giant Unilever which would result in one of the biggest groups in the world selling over 400 consumer/household goods to over a third of mankind. Synergies may well be significant and could help offset myriad headwinds (FX, rising commodity prices, regulations, declining sales), but simply on size alone anti-competition hurdles would surely be even more so, not just in Europe but round the world given both groups’ geographic reach. And their size means the deal could be one of the longest to get approval in history.
"Kraft (pre-Heinz, pre-2015) also has form in the UK, of the negative type. In 2010 it gobbled up Cadbury, making assurances about job security which were ultimately and almost immediately ignored, a plant closure being blamed on ‘economic reasons’ (krafty!). New rules mean much more information required about a buyer’s intentions from the word go. And the last government has already intervened since to prevent US Pharma giant Pfizer buying out the UK's AstraZeneca."
Spat erupts between oil explorer Bowleven and activist shareholder Crown Ocean
East African oil explorer Bowleven has hit out against calls from its largest shareholder to reform itself ahead of a shareholder vote next month.
In an open letter the £100m oil group dismissed a swathe of claims made against the board by Crown Ocean Capital and urged investors to vote against its demands.
Bowleven said it did not believe that shareholders were best served by a series of public claims and counterclaims, but nonetheless slammed the accusations and proposals made by its majority stakeholder.
Crown Ocean, a Monaco-based offshore private investment fund, has called for a boardroom purge and demanded that Bowleven abandon its position as an exploration and production company in order to return excess cash to its shareholders and operate as a holding company.
Report by Jillian Ambrose (Read more here)
Wall Street opens lower as financials weigh
US stocks opened lower this afternoon as investors booked profits on financial stocks, while awaiting clarity on economic policy.
At the opening bell:
- Dow Jones: -0.29pc
- Nasdaq: -0.26pc
- S&P 500: -0.13pc
Kraft Heinz & Unilever: Falling sterling and lack of organic growth
Naeem Aslam, of Think Markets, weighs in on Kraft approaching Unilever:
"For now, we are safe, Unilever has refused, but this may be nothing but another tactic from their book - the art of making a deal.
"We anticipate that this has a lot to do with Brexit as well. Theresa May has not triggered the Brexit yet, the effects of this have started to surface. Perhaps, predators see a lot of blood and opportunity and falling sterling has produced enough blood on the street for firms around the world to look and cash on opportunities. They are coming out with big bazookas and trying to make deals which we have not seen. You can not blame them because tt is cheap for them and the time is right. So we do not think Kraft Heinz is going to back down anytime soon.
"If the deal does see the daylight, this simply mean more job loss for UK and more pain for consumers as competition will erode."
Unilever adds near $19bn in market cap in 80 mins of trading
Unilever responds: No merit, either financial or strategic, for shareholders
Unilever have responded to Kraft's statement. Here's what they said:
Unilever notes the recent announcement by The Kraft Heinz Company ("Kraft Heinz") that it has made a potential offer for all of the shares of Unilever PLC and Unilever N.V.
Their proposal represents a premium of 18pc to Unilever's share price as at the close of business on 16 February 2017. This fundamentally undervalues Unilever. Unilever rejected the proposal as it sees no merit, either financial or strategic, for Unilever's shareholders. Unilever does not see the basis for any further discussions.
Unilever PLC and Unilever N.V. recommend that shareholders take no action. Further announcements will be made as appropriate.
The proposal received was that Unilever common shareholders would receive $50.00 per share in a mix of $30.23 per share in cash payable in U.S. dollars and 0.222 new enlarged entity shares per existing Unilever share, which valued Unilever at a total equity value of approximately $143 billion.
As at the close of business on 16 February 2017, a mix of $30.23 in cash payable in U.S. dollars and 0.222 Kraft Heinz shares per existing Unilever share would value each Unilever common share at $49.61, representing a premium of 18pc to Unilever's share price.
As stated in the recent announcement by Kraft Heinz, in accordance with Rule 2.6(a) of the Code, by not later than 5.00 pm on 17 March 2017, Kraft Heinz must either announce a firm intention to make an offer for Unilever under Rule 2.7 of the Code or announce that it does not intend to make an offer for Unilever, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline will only be extended with the consent of the Takeover Panel in accordance with Rule 2.6(c) of the Code.
As required by the Code, Unilever confirms that this announcement is not being made with the agreement of Kraft Heinz.
There can be no certainty that any offer will be made nor as to the terms on which any such offer might be made.
Kraft bid for Unilever- cheap money meets industrial logic
Unilever has received a takeover approach from Kraft Heinz, which is controlled by Warren Buffett and the giant Brazilian 3G outfit. Unilever has spurned the first advance, but Kraft Heinz want to keep talking, which suggests they are prepared to raise their bid.
Steve Clayton, fund manager of the HL Select UK Shares fund, said:
"This is cheap money meeting industrial logic. Putting portfolios of brands together can create huge synergies across marketing, manufacturing and distribution, even before you think about cutting the combined HQ back to size. Kraft Heinz are attempting a massive push on the Fast Forward button, for to acquire the sheer scale of brands that Unilever represents through one-off acquisitions could take decades. With debt cheap and abundant right now, Kraft have spotted their opportunity.
"Unilever were clearly in no mood to sell, having spurned the first advance, but Kraft Heinz are not put off. But what will Unilever’s shareholders have to say? The long term boost to portfolios that Unilever has delivered has been enormous. A short term premium today is no compensation for losing the growth that Unilever could produce for decades to come. So to win over a majority of Unilever’s shareholders, we think Kraft Heinz will need to dig very deep indeed."
Full Heinz/Kraft statement here on Unilever - says made approach, rebuffed -still nothing from Unileverhttps://t.co/XDLJ8LquWK— James Quinn (@jamesrquinn) February 17, 2017
Kraft Heinz reported a decline in Q4 sales yesterday
Michael Hewson, of CMC Markets, flags that Kraft Heinz reported a decline in Q4 sales yesterday and that it is expected to push through deeper costs cuts over next two years.
Yesterday Kraft Heinz reported a decline in Q4 sales, expected to push through deeper costs cuts over next two years. Now $ULVR in sights— Michael Hewson (@mhewson_CMC) February 17, 2017
Few initial thoughts on the approach from Neil Wilson, of ETX Capital. He questions would competition authorities let this one through?
"It could come up against a number of hurdles as it would create a giant in the sector. EU regulators in particular could be against it.
"Kraft Heinz has the experience to drive the integration. Costs synergies are the name of the game – combing ops and supply chains. Both are coming into this on the back foot a touch. Unilever sales growth has slowed and come in below expectations while Kraft posted a 3.7pc drop in the 4th quarter.
"The combined entity would have a huge brand footprint and be able to flex bargain muscles even more with supermarkets. As seen vis-à-vis Unilever-Tesco this could be useful.”
Warren Buffett's Kraft Heinz rebuffed after approaching Unilever over £100bn-plus takeover
Here's our full report on Kraft approaching Unilever by our retail editor Ashley Armstrong:
Unilever, the Anglo-Dutch consumer giant behind Dove soap, Flora margarine and Marmite, has rebuffed a £100bn-plus takeover approach from US rival Kraft Heinz.
A potential combination would create a company with €78.7bn (£67.4bn) in revenues and unite the world's biggest brands and create a global giant in household goods with the rights to Heinz baked beans and Philadelphia cheese.
Unilever's shares soared by more than 11pc following confirmation of the takeover approach on Friday. In midday trading the company's shares were up 376.5p to £37.25, valuing Unilever at £112.7bn.
In a statement to the London Stock Exchange, Kraft Heinz said that it had confirmed that it had "made a comprehensive proposal to Unilever about combining the two groups to create a leading consumer goods company with a mission of long-term growth and sustainable living."
"While Unilever has declined the proposal, we look forward to working to reach agreement on the terms of a transaction."
Half-time update: FTSE 100 turns positive after Kraft confirms Unilever merger talks
The FTSE 100 has turned positive after Unilever shares spiked to a record high. It followed confirmation from Kraft that it approached Unilever with a merger proposal, which was subsequently declined.
Meanwhile, European bourses are stuck in the red this afternoon as energy and banking stocks weigh.
Here's a snapshot of the current state of play in Europe:
Kraft Heinz confirms merger proposal
Here's the statement released by Kraft Heinz in which it confirms merger talks with Unilever:
"The Kraft Heinz Company ("Kraft") notes the recent speculation regarding a possible combination of Kraft and Unilever plc / Unilever NA ("Unilever"). Kraft confirms that it has made a comprehensive proposal to Unilever about combining the two groups to create a leading consumer goods company with a mission of long-term growth and sustainable living.
"While Unilever has declined the proposal, we look forward to working to reach agreement on the terms of a transaction. There can be no certainty that any further formal proposal will be made to the Board of Unilever or that an offer will be made at all or as to the terms of any transaction."
Unilever shares touch record high
Unilever shares have touched a record high after jumping by as much as 14pc and is on track for its best day in 30 years after Kraft confirms merger proposal.
Kraft said Unilever rejected its approach,but it intends to make a further offer.
Earlier, FT Alphaville reported Kraft was interested in a takeover at £40/share.
ULVR trading fresh ATH; assuming £32.5 base price, 25% prem = £40.60— Mike van Dulken (@Accendo_Mike) February 17, 2017
Shares in Unilever spike after Kraft confirms merger talks with Unilever
Shares in Unilever spiked 13pc after Kraft confirmed merger talks with the FTSE 100 company.
In a statement regarding bid speculation, Kraft confirmed that it has made a comprehensive proposal to Unilever about combining two groups. However, it said Unilever has declined the proposal, before adding it looks forward to working to reach an agreement on the terms of the transaction.
Unilever shares jump 4pc on takeover rumours
Shares in Unilever have popped in mid-morning trade, up 4pc to the top of the blue chip index at £34.83, and volume has spiked amid rumours of a takeover approach from Kraft-Heinz.
The FT has reported Kraft-Heinz is interested in Unilever at a price of £40 a share.
British Steel names new chief executive to lead turnaround
Away from financial markets, British Steel has named a new chief executive. Industry editor Alan Tovey has the details:
British Steel - the company reborn when Tata sold off its Scunthorpe plant - has appointed a chief executive officer to head the business.
Peter Bernscher will join the privately owned company in May, gradually taking over day-to-day control from executive chairman Roland Junck, who will give up some of his duties.
Mr Bernscher is a 30-year veteran of the industry and currently works for Austrian steel and industrials group business Voestalpine as an executive board member of the company’s metal forming division.
British Steel was brought back to life in April last year when turnaround fund Greybull bought Tata’s “long products” division - which makes steel rails and construction beams - for a symbolic £1.
The British Steel name disappeared almost 20 years ago when the business merged with a Dutch peer to form Corus, which was bought by Tata a decade ago.
Greybull revealed a £400m investment package that was intended to turn around the troubled business, which Tata had been trying to sell for several years. The deal saved about 4,000 jobs, which had been hanging in the balance amid fears the plant could be shut down if no buyer was found.
FTSE 100 set for week of modest gains
Even though the FTSE 100 has slipped into the red for a second consecutive day, the blue chip index is still poised to record modest gains for the week.
This will mark the FTSE 100's third consecutive week of gains.
Earlier this week, it hit a one-month high.
Michael Hewson, of CMC Markets, said: "Some light profit taking on banks and miners has also played into the slight softer theme for today, with Standard Chartered and Anglo American being some of the biggest fallers. Declines in Copper prices are being blamed for the selloff in miners with limited exposure to gold, as the yellow metal continues its march onwards and upwards towards its 3-month highs.
"Pharmaceuticals continued to rally this morning following on from Shire’s better than expected results yesterday. The global biotechnology company saw a 78pc rise in sales in the year finishing December 2016, and once the costs of the Baxalta acquisition had been stripped out, profits increased 59pc to $4.42 bn. The sector has been given a further boost as this morning AstraZeneca revealed positive results from its breast cancer treatment trials that was followed by its top shareholder Woodford Investment Management increasing their stake in the company."
Sentance: Clearest evidence yet that rising prices will squeeze consumer spending in 2017 and 2018
Andrew Sentance, senior economic adviser at PwC, said today's retail figures provide the clearest evidence yet that rising prices will squeeze consumer spending throughout this year and into 2018.
"A sharp turnaround in the inflation environment has put a sharp brake on the growth of retail spending - and we are likely to see more of the same as we move through 2017 and next year.
“In 2015 and the first half of last year, falling prices on the high street and at the petrol pump boosted the volume of retail spending. Shop and motor fuel prices were falling by 2.5pc to 3pc a year over this period and this supported 4.5pc-5pc growth in the volume of retail sales.
“By contrast, this January we have seen a rise in prices in the retail sector - which are now nearly 2pc up on a year ago. Not surprisingly this change in the inflationary trend has squeezed the growth in the volume of retail spending to just 1.5pc compared with last year.
“As we saw in the early 2010s, it is hard for retailers and other consumer businesses to achieve high volume growth when inflation is high and wages are not rising to compensate. This is the pattern we should expect to see repeated in 2017 and 2018.”
Barclays: Expect more price rises in the coming months
Ian Gilmartin, Head of Retail & Wholesale at Barclays, thinks softer retail sales volumes were to be expected in January following a strong final quarter of 2016.
“Despite today’s data, it’s not all doom and gloom, with many retailers I speak to still achieving good results and optimistic about their prospects for the future.
"Inflation is the buzzword on everyone’s lips at the moment, and cost and pricing considerations are now justifiably the focus of attention for retailers. The current inflation growth is being driven by fuel and food price increases, which is eating into the level of disposable income available to consumers for other purchases. Last year retailers largely resisted passing on costs to their customers, but we are now also observing smaller price rises right across the retail sector.
"With further pressure ahead for many retailers from business rate changes, we can expect more price rises in the coming months, with the extent of these price moves dependent on how effectively costs can be managed. It’s likely that the retailers who can adapt successfully and make the right judgement calls on their price points will have the most success this year.”
Resolution Foundation: Underlying retail sales trend turns negative for the first time since December 2013
Matt Whittaker, of Resolution Foundation, notes that today's retail figures are a potential turning point for consumers after the underlying retail sales trend turned negative for the first time since December 2013.
Potential turning point for consumers as underlying retail sales trend turns negative for first time since Dec13. Rising inflation seems key pic.twitter.com/xvmGRYwBNn— Matt Whittaker (@MattWhittakerRF) February 17, 2017
UK retail sales highlights consumer slowdown
Joshua Mahony, of IG, has said this morning's UK sales figures paint a worrying picture.
"UK retail sales failed to live up to expectations this morning, with the reading posting its second consecutive negative reading for the first time since early 2016. Probably the biggest warning sign was the December revision, which showed that in declining 2.1pc, that month saw the second biggest fall in retail sales for 20 years.
"With a weaker pound, the idea was that people would spend more, yet recent months have instead shown that falling consumer confidence could be having a material impact upon spending."
Capital Economics: Higher inflation starting to squeeze UK consumers
Capital Economics warns that higher inflation is starting to squeeze UK consumers after data from the ONS showed retail sales volumes fell 0.3pc in January, while prices rose at their fastest pace since July 2013.
Retail sales fall three months in a row for first time in at least two decades
Inflation - and Brexit jitters too? - hitting the UK consumer. Retail sales fall 3 months in a row for first time in at least two decades. pic.twitter.com/dFh7rScmLU— Jamie McGeever (@ReutersJamie) February 17, 2017
Analysts react: Consumers crumble under inflation pressure
After digesting the slide in UK retail sales, here's what the experts had to say:
Neil Wilson, of ETX Capital, says today's figures show a downward trend and the anticipated knock to consumer spending from rising inflation may already be evident.
"Households are clearly starting to feel the effects of the pound’s fall in value and this will only get worse as prices rise over the coming months as hedging contracts expire.
"Consumer spending is now starting to weaken and this is bad news for the UK economy, which has been very resilient so far since June because consumer sentiment has been good. However most of this confidence, which helped send the UK to the top of the G7 for growth last year, was driven by high levels of consumer borrowing. Bank of England figures show a slowing in consumer debt between Nov and Dec and this is hitting retail sales."
Inflationary pressures beginning to tell. Retail sales fall 0.3% in Jan17. Rising inflation and consumer pressures to be a feature of 2017 pic.twitter.com/NyBkTy35DY— Jordan Buchanan (@jbuchanan0707) February 17, 2017
Meanwhile, Samuel Tombs, of Pantheon Macroeconomics, notes that the failure of retail sales in January to rise at all after December’s 2.1pc month-to-month drop demonstrates that consumers’ spending has shifted down several gears in response to slowing employment growth and rising inflation.
Sales fall as inflation rises, wages unable to keep up and credit growth slowing. The consumer driven expenditure boom is over— World First (@World_First) February 17, 2017
Howard Archer, of IHS Markit, said: "The economy’s persistent resilience since last June’s Brexit vote has been largely built on consumers keeping on spending. If consumers really are now beginning to moderate their spending, the long anticipated slowdown in the economy may be about to materialize."
Naeem Aslam, of Think Markets says the figures show that consumers are starting to feel the squeeze due to the increase in the inflation.
"Earlier this week, we have seen that wages are not improving while inflation is moving higher. Higher inflation will simply erode the purchasing power if there is no support in terms of higher wages. Higher prices are biting and there is no denial in this. If you look at the number for the previous number, that was negative so you can say that we have a trend now which shows the consumers are suffering."
UK #RetailSales weaker than expected. The data is beginning to show that UK consumers are feeling the squeeze as inflation surges ^MB— ING Economics (@ING_Economics) February 17, 2017
Reaction: First time UK retail sales have fallen three months in a row since 2000
Jamie McGeever, of Reuters, highlights that the fall in retail sales in January marks the third successive month of declines, that's the first time since 2000 that sales have fallen three months in a row.
Bad UK retail sales.— Jamie McGeever (@ReutersJamie) February 17, 2017
-0.3% in Jan, first time since 2000 they've fallen 3 months in a row; Dec revised to -2.1% third biggest fall in 21 yrs pic.twitter.com/wFYwyHyrft
More of this to come with rising inflation ahead... https://t.co/oCFp6mo8lB— Anthony Cheung (@AWMCheung) February 17, 2017
Meanwhile, Piers Curran, of Amplify Trading, notes the figures are a bad sign for 2017 GDP growth.
GBP saying bad retail sales outweigh ever rising inflationary pressure— Mike van Dulken (@Accendo_Mike) February 17, 2017
MID-SESSION UPDATE: January Blues see dreary UK retail sales, while Bunds get that Friday feeling to trade above 164 https://t.co/yF8FSIA8Os— RANsquawk (@RANsquawk) February 17, 2017
Today's retail sales figs a reminder that the living standards story of 2017 will be played out in the supermarket rather than labour market— Rob Holdsworth (@robholdsworth) February 17, 2017
Markets react to fall in UK retail sales
Here's a quick look at how investors digest the 0.3pc fall in UK retail sales volumes in January and the 1.9pc rise in retail prices in January compared with a year ago, the most since July 2013:
- Sterling falls by more than half a percent to $1.2402 against US dollar;
- Sterling dips 0.2pc against the euro to 85.65p;
- UK 10-year gilt yield falls to lowest since February 9 at 1.299pc, down more than three basis points on the day;
- FTSE 100 trims losses, down 0.2pc on the day.
UK retail sales: Key charts
Here are the key charts worth paying attention to following the release of the UK retail sales data from the ONS, which showed volumes fell by 0.3pc in January:
Chart 1: Rolling 3 month-on-month and monthly all retailing, seasonally adjusted sales volumes and implied deflator, non-seasonally adjusted
Chart 2: Quantity bought and amount spent, seasonally adjusted and implied deflator, non-seasonally adjusted in predominantly food stores
Chart 3: Contributions to year-on-year volume and value growth from the 4 main retail sectors (January 2017 compared with January 2016)
Chart 4: Contributions to month-on-month volume and value growth from the 4 main retail sectors (January 2017 compared with December 2016)
UK retail sales: increased prices in fuel and food are significant factors in this slowdown
Kate Davies, ONS Senior Statistician said:
"In the three months to January, retail sales saw the first signs of a fall in the underlying trend since December 2013. We have seen falls in month-on-month seasonally adjusted retail sales, both in conventional stores and online, and the evidence suggests that increased prices in fuel and food are significant factors in this slowdown."
First fall in underlying 3 month on 3 month retail sales trend since Dec 2013 https://t.co/NwbO6pVdLz— ONS (@ONS) February 17, 2017
Uk retail sales fall as consumers take a hit from inflation: Key points
British retail sales unexpectedly fell in January, adding to a slump in December, showing that consumers are reining in their spending as inflation rises after last year's Brexit vote.
Here are the key points from the ONS data release:
- In January 2017, the quantity bought in the retail industry is estimated to have increased by 1.5pc compared with January 2016, the lowest growth since November 2013.
- Month-on-month the quantity bought is estimated to have fallen by 0.3pc.
- The underlying pattern as suggested by the 3 month on 3 month movement decreased by 0.4pc; the first fall since December 2013.
- Average store prices (including fuel) increased by 1.9pc on the year, the largest contribution to this increase came from petrol stations, where year-on-year average prices were estimated to have risen by 16.1pc.
- Online sales (excluding fuel) increased by 10.1pc year-on-year, but fell on the month by 7.2pc; accounting for approximately 14.6pc of all retail spending.
Breaking: UK retail sales fall in January, prices rise at fastest pace since mid-2013
UK retail sales volumes fell by 0.3pc month-on-month in January, much weaker than forecast 0.9pc increase, data from the ONS showed.
The ONS said retail prices rose 1.9pc in January compared with a year ago, the most since July 2013 and up sharply from December's 0.9pc. The rise in motor fuel prices, up 16.1pc, was the biggest since September 2011.
0.3% fall in month-on-month retail sales in January https://t.co/jaX1Wz8KBO— ONS (@ONS) February 17, 2017
More to follow...
How strong are UK consumers?
Today allows us a look at the retail sales picture here in the UK wherein the real second round effects of Brexit are likely to be felt, Jeremy Cook, of World First, said.
"Consumer credit grew at its slowest rate in January for over two and a half years in a sign that consumers are starting to pull in their horns. Sales dipped in December; consumers buying in November, taking advantage of Black Friday discounting seems likely but will they have remained weak in January?
"Of course, one argument could be that consumers will continue to shop ahead of anticipated price increases."
UK retail sales figures will be released at 9.30am.
Pound slumps ahead of UK retail sales data
Ahead of the release of UK retail sales data at 9.30am, the pound has slumped back towards one-week lows.
It tumbled by 0.11pc to $1.2459 against the US dollar as investors awaited clues on an economy which has proved resilient since hte Brexit vote.
Analysts preview UK retail sales figures
Ahead of the release of UK retail sales data, here's what the experts have to say:
Mike van Dulken, of Accendo Markets, said the UK retail sales growth is forecast to have rebounded in January although the annual pace likely continued to slow from October’s ten-year peak.
"This would add to hotter inflation data and slower wages growth earlier in the week, suggestive of a weaker GBP beginning to bite via higher import prices."
Meanwhile, Naeem Aslam, of Think Markets, said the data release will tell you a lot about consumer spending behaviour and their confidence.
"Earlier this week, we saw that wages are not keeping up with inflationary pressure and if this becomes the trend, we have serious problems ahead for the economy. The U.K's retail industry alarm bell did issue some warnings and this makes us think that the upcoming retail sales number may come in on the weaker side. The forecast for today's number is for a rise of 0.9pc which we think has set the stage for disappointment."
Simon French, of Panmure Gordon, said UK retail sales are expected to show a further moderation in growth (+4.3pc YoY prev.) as households take stock on the prospect of higher inflation and continued restraint in nominal wage settlements.
"The fundamentals however remain supportive and sales of household goods and clothing have recovered following a weak H1 2016. However the story in the sector remains the exponential growth in channel shift with +23pc YoY growth in online sales during December – a multi-year high as online sales held above 15% during festive trading for the first time."
European bourses falter at opening bell as miners weigh
European bourses slipped at the opening bell as mining stocks weighed followed a slide in iron prices. Nevertheless, European shares are still set for a second weekly gain.
Here's a snap shot of the current state of play:
Mike van Dulken, of Accendo Markets, said: "Calls for tepid European start to the final session of the week come after a mixed close on Wall street as the Trump trade appeared to lose steam heading into a long weekend following a record run and rather lively presidential press conference. This morphed into a down day for Asia overnight despite the USD finding support to quell yesterday’s currency strength hindrance among peers (GBP, EUR, JPY), something that hampered equity sentiment yesterday."
Hong Kong stocks ease as investors book profits
Hong Kong stocks fell overnight as capital inflows from the mainland took a breather and investors locked in profits after the main index closed at an 18-month high the previous session.
The benchmark Hang Seng index dropped 0.3pc, to 24,033.74 points, while the Hong Kong China Enterprises Index lost 0.9pc, to 10,360.13 points.
For the week, the main index gained 1.9pc, with market turnover rising to the highest since the week ending Aug. 28, 2015.
Good morning from Berlin. Asia stocks drop following lower Wall St as investors take profits. Oil up over hopes OPEC cuts outweigh US supply pic.twitter.com/ZmTgnrGY9t— Holger Zschaepitz (@Schuldensuehner) February 17, 2017
Southbound inflows through the Shanghai-Hong Kong Stock Connect dropped sharply on Friday, using 2.2pc of the daily quota, compared with an average of 24pc in the past five sessions.
Analysts said Chinese investors' interest in Hong Kong stocks was improving due to their lower valuations versus mainland peers and as Beijing clamped down on speculative trading to control asset price bubbles on the mainland.
Report from Reuters
Agenda: Investors eye UK retail sales
Good morning and welcome to our live markets coverage.
Despite world stocks storming to a record high yesterday, Wall Street snapped its winning streak with the S&P 500 edging lower in what was a mixed session.
Investors digested recent gains and sold banks that have been big winners in the "Trump rally" that has seen the S&P 500 rise about 5pc so far in 2017, with the Dow Jones Industrial Average up 4pc.
Today, attention turns to UK retail sales figures which are expected to rise 0.9pc in January. On an annualised basis a decline of 3.4pc is expected.
Previewing the economic data release, due for publication at 9.30am, Michael Hewson, of CMC Markets, said: "When December’s UK retail sales numbers came out there was some puzzlement as to why they were so poor given that in the week leading up to the release a stream of retailers had put out some fairly positive trading updates, for the pre and post-Christmas period.
Just a reminder on how UK retail sales finished 2016... January numbers coming up at 9.30am pic.twitter.com/Xn4tsHYc8v— Anthony Cheung (@AWMCheung) February 17, 2017
"Since then we’ve seen inflationary pressures increase in the latest January inflation data, and the most recent wages data up to December has shown some signs of softening, even though the labour market continues to hold up well.
"This might suggest that we could well see a weak January UK retail sales number when the latest numbers are released later this morning, particularly since last week’s British Retail consortium January sales numbers showed a decline of 0.6pc. Even so it has to be said that it’s not always a good leading indicator given that we saw is post a 1pc gain for December, the complete opposite of the ONS numbers."
Also on the agenda:
Full-year results: Essentra, Millennium & Copthorne Hotels, Kingspan, Segro
Economics: Public sector net borrowing (UK), retail sales m/m (UK), current account (EU)