London close: Stocks mixed as geopolitical worries ease

(Sharecast News) - London stocks ended Friday on a mixed note, with sentiment dampened by a series of lacklustre UK economic data releases, while broader geopolitical concerns eased slightly. The FTSE 100 index slipped 0.2% to 8,774.65 points, while the FTSE 250 gained 0.35% to close at 21,148.50 points.

In currency markets, sterling was flat against the dollar to trade at $1.3465, while it slipped 0.13% against the euro, changing hands at €1.1700.

"Wall Street has pushed higher as the threat of US intervention in the Middle East having abated for now," said IG chief market analyst Chris Beauchamp.

"Trump's infamous 'two-week period' for making decisions seems to suggest that the rush towards further conflict has been halted, though Iranian intransigence might provoke the president.

"This should also cool oil prices for the time being too, with the market having become relatively desensitised to the back-and-forth of missile launches and air strikes that currently characterises the Iran-Israel war."

Beauchamp noted that consolidation had been the theme in US stocks for some time, but hints of a "more dovish approach" from the Fed were being kept alive by Christopher Waller, who said the time had come for the Fed to cut rates.

"Even tariffs are not expected to provide a permanent boost to inflation, he added, bolstering the cause for 'looking through' any increase and focusing on the need to support the US economy."

UK consumer sentiment improves, retail sales fall sharply

In economic news, consumer sentiment in the UK improved in June, despite signs of weakness in household spending and continued pressure on public finances.

According to GfK's long-running survey, the consumer confidence index rose two points to -18, the best reading since early 2022.

While still firmly in negative territory, the uptick reflected growing optimism about the general economic outlook, with that sub-index climbing five points to -28.

Expectations around personal finances, however, remained unchanged, and the major purchase index held steady.

Neil Bellamy, consumer insights director at GfK, sounded a note of caution, however.

"Confidence is still fragile, because the dark shadow of inflation is a day-to-day challenge for so many of us," he said.

"With petrol prices set to rise in the coming weeks following the escalation of the conflict in the Middle East, and with ongoing uncertainty as to the full impact of tariffs, there is still much that could negatively impact consumers."

In contrast, retail sales fell sharply in May, with the Office for National Statistics reporting a 2.7% month-on-month decline.

That was well below economists' forecasts and marked the biggest drop since May 2021.

Food store sales were particularly weak, falling 5% as households scaled back spending amid ongoing cost-of-living pressures.

The ONS said supermarkets reported lower volumes and reduced demand for alcohol and tobacco products.

"Retail sales fell sharply in May with their largest monthly fall since the end of 2023," said ONS senior statistician Hannah Finselbach.

"This was mainly due to a dismal month for food retailers, especially supermarkets, following strong sales in April. Feedback suggested reduced purchases for alcohol and tobacco with customers choosing to make cutbacks.

"The falls were consistent across all sectors with clothing and household goods stores reporting slow trading due to reduced footfall."

Public sector borrowing also remained elevated, with the government borrowing £17.7bn in May, the second-highest level for the month on record.

The figure was higher than expected, despite a jump in tax receipts and changes to National Insurance contributions.

The ONS said total receipts rose to £82.5bn, including £61.7bnin taxes.

However, higher spending linked to inflation and running costs contributed to the overall deficit.

Public sector net debt excluding banks was estimated at 96.4% of GDP.

"Today's public sector finance data are unlikely to ease pressure on Rachel Reeves, as elevated borrowing levels have been a major feature of her time as chancellor, eroding her message that she is putting the country on a firmer financial footing," commented Kathleen Brooks, research director at XTB.

Elsewhere in Europe, wholesale inflation in Germany continued to ease.

Producer prices fell by 0.2% in May, the sixth consecutive monthly decline.

On an annual basis, prices were down 1.2%, driven by a sharp drop in energy costs, including double-digit declines in heating oil and electricity prices.

Stripping out energy, however, producer prices were unchanged on the month and rose 1.3% year-on-year, pointing to some underlying price stability in the wider economy.

Housebuilders in the red, Carnival rises on tourism optimism

On London's equity markets, housebuilders were broadly lower, led by Berkeley Group Holdings, which dropped after reporting a 5% decline in annual pre-tax profit to £529m.

The company, however, struck a confident tone, citing lower interest rates and government support for brownfield development.

It also announced a leadership transition, with finance chief Richard Stern set to replace Rob Perrins as CEO in September, while chairman Michael Dobson will step down.

Other housebuilders, including Persimmon, Barratt Redrow, Vistry Group, and Bellway, also traded lower amid broader weakness in the sector.

Energy giants BP and Shell declined as oil prices retreated.

The drop came after the US signalled it would delay any decision on potential involvement in the Israel-Iran conflict by two weeks, easing immediate supply concerns in the oil market.

On the upside, shares in Carnival rose, supported by hopes of de-escalation in the Middle East, which boosted sentiment in the travel and leisure sector.

Reporting by Josh White for Sharecast.com.