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FTSE rises despite fall in UK retail sales and factory slowdown

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London Stock Exchange
London Stock Exchange Group saw a 2.1% rise in revenue in the third quarter of the year. Photo: Thomas Krych/SOPA/LightRocket via Getty Images

The FTSE 100 (^FTSE) climbed higher on Friday, shrugging off news that retail sales fell for their fifth consecutive month in September, and a slowdown in factory output growth.

London’s benchmark index ended the day 0.2%, lagging behind its continental peers, while the CAC (^FCHI) rose more than 0.7% in France, and the Frankfurt DAX (^GDAXI) was almost 0.5% higher.

According to data from the Office for National Statistics (ONS), the volume of retail sales last month fell 0.2% compared to August, marking the longest period of back-to-back monthly declines since records began in 1996.

Economists had expected a 0.5% rise, however despite the fall, sales were 4.2% above their pre-pandemic levels in February 2020.

Spending fell most sharply at non-food stores, where sales volumes dropped by 1.4%.

“Retailers will be concerned by the slump in sales, just as they begin their preparations for the all-important Christmas period," Helen Dickinson, chief executive of the British Retail Consortium, said. 

"Fuel shortages, wet weather, and low consumer confidence all contributed to lower consumer demand this month, with household goods, furniture and books all hit particularly hard."

Read more: UK retail sales slump to record low for September

Meanwhile, factory output growth in Britain was hit by supply shortages in October, with manufacturers signalling another slowdown due to a lack of staff and material.

Stronger wage pressures and the worsening global supply chain crisis contributed to the fastest rate of input price inflation at UK private sector companies since its index began in January 1998.

Elsewhere, London Stock Exchange Group (LSEG.L) saw a 2.1% rise in revenue in the third quarter of the year, but warned supply chain disruptions could affect the timing of some of its spending on technology.

The company does expect income in the year to April to grow between 4%-5%, but for income in the fourth quarter not to increase as fast as it did.

Watch: UK economy: Business calls on Boris Johnson to put flesh on bones of post-Brexit vision

Across the pond, the S&P 500 (^GSPC) dipped 0.5% at the time of the Europe close, and the tech-heavy Nasdaq (^IXIC) slumped more than 1.1%. After a positive open, the Dow Jones (^DJI) fell 0.1%.

The S&P 500 hit a new record high at close last night, as earnings numbers continued to beat expectations, following on from the Dow the day before. Meanwhile, the US dollar is on track for its second weekly decline.

It came as initial jobless claims in the US dipped to a new post-pandemic low on Thursday, according to official data. Just 290,000 Americans filed new claims for unemployment insurance last week, a 6,000 fall on the previous week.

Richard Hunter, head of markets at Interactive Investor, said: "More broadly, there is further evidence of a tightening labour market, as jobless claims fell to a 19-month low. 

"Another theme which remains central is persistent inflation, which has led investors to assume that some form of monetary tightening is imminent. While interest rate rises are, by consensus, still in the long grass, the likelihood of tapering in November seems now to be fully expected.

Read more: Make your own coffee: Pret trials self-serve hot drinks

This was the lowest level for initial claims since the middle of March last year, just before lockdowns drove jobless claims to record highs. It was also the second straight week that claims remained below 300,000 as employers hold on to workers amid staff shortages.

Technology stocks were leading the way overnight on Friday in Asia, while Chinese property stocks also rallied after a surprise interest payment by debt-ridden developer Evergrande Group.

However, energy stocks and cyclical shares dragged lower amid worries that central bankers will need to tighten monetary policy into slowing growth in order to tackle persistent inflation.

In Japan, the Nikkei (^N225) climbed 0.3% while the Hang Seng (^HSI) rose 0.4% in Hong Kong, and the Shanghai Composite (000001.SS) dipped 0.3%

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