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FTSE gains even as recession risk increases on December retail sales drop

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ftse City workers and shoppers in an urban landscape of symmetrical retail reflections and diagonals outside a branch of Boots The Chemist in the City of London, the capital's financial district, on 16th January 2024, in London, England. (Photo by Richard Baker / In Pictures via Getty Images)

The FTSE 100 gained even as the ONS reported disappointing retail sales data for December. (Richard Baker via Getty Images)

The FTSE 100 and European stocks gained on Friday morning in London, despite news that UK retail sales data had been disappointing in December.

London’s premier index (^FTSE) was 0.7% higher in early trade, while the DAX (^GDAXI) in Germany rose 0.4% and Paris’s CAC (^FCHI) was up 0.5%. The pan-European Stoxx 600 (^STOXX) rose 0.4%.

UK retail sales volumes are estimated to have fallen by 3.2% in December 2023, from a rise of 1.4% in November 2023 (revised up from an increase of 1.3%), according to the Office for National Statistics (ONS).

December’s decrease was the largest monthly fall since January 2021, when coronavirus restrictions affected sales.

The fall makes it more likely that the economy was in negative territory over the fourth quarter of the year, heightening the risk of recession.

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“Food stores performed very poorly, with their steepest fall since May 2021 as early Christmas shopping led to slow December sales,” said Heather Bovill deputy director for surveys and economic indicators at the ONS.

“Department stores, clothing shops and household goods retailers reported sluggish sales too as consumers spent less on Christmas gifts, but had also purchased earlier during Black Friday promotions, to help spread the cost,” she added.

Non-food store sales volumes fell by 3.9% in December 2023, following a 2.7% increase in November 2023 when earlier Black Friday sales, and wider discounting, increased sales.

While the FTSE rose, the pound (GBPUSD=X) headed south, falling 0.3% against the dollar. It was trading around the $1.26 mark just before 9am.

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  • Overnight in the US and Asia

    Asian stocks rounded out the week on a mixed note, with the Nikkei (^N225) finishing the session up 1.4%, and Chinese stocks in the red. The Hang Seng (^HSI) in Hong Kong finished 0.7% lower, while the SSE Composite (000001.SS) was down 0.5%.

    Fresh data showed that Japan’s inflation slowed for a second straight month, increasing the chance that the Bank of Japan will keep interest rates on hold at its meeting next week. The country’s annual headline inflation rate has remained above the BOJ’s 2% target since April 2022, with a gradual decline observed from its peak of 4.3% last year to the rate of 2.6% in December that was reported Friday.

    Earlier in the week Chinese stocks had experienced a more punishing sell off after China’s fourth-quarter gross domestic product growth missed estimates. There have been worries for some time now about stalling growth across China, which is typically seen as one of the world’s growth engines.

    Over in the US, indexes told a different story, with the S&P 500 (^GSPC) up 0.9%, the Dow (^DJI) rising 0.5% and the Nasdaq (^IXIC) gaining 1.4% in Thursday’s session.

    The Nasdaq hit a record high on Thursday as stocks rebounded, led by notable tech performances such as Microsoft (MSFT) and NVIDIA (NVDA).

  • Good morning!

    Hello! It’s Lucy Harley-McKeown here in London, looking forward to another day of markets news. We’ve already had ONS retail sales figures which signalled a dour Christmas period for the high street. Later we will have more updates from Davos. Let’s get to it.

Watch: Inflation predicted to slow in 2024, but it doesn’t mean prices will drop

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