Friday 19 June 2020 3:14 pm

FTSE 100 rise as retail sales start to bounce back

The FTSE 100 solidified this week’s gains on hopes of a swift economic recovery, after figures released this morning showed retail sales beginning to bounce back.

London’s blue-chip index opened 26 points higher – 0.43 per cent – to 6,250 points, as investors began to digest a fresh round of economic data.

Read more: UK retail sales start to rebound in May following record drop

By the afternoon, the FTSE 100 was trading 1.33 per cent higher.

Data released by the Office for National Statistics (ONS) showed that retail sales rose 12 per cent last month, beating expectations.

Record borrowing figures released for April and May’s lockdown have done little to dent the FTSE 100’s sentiment. Focus instead appears to be on signs the economy is starting to open back up.

ONS figures show UK borrowing jumped to £103.7bn over April and May’s lockdown. Debt also rose 20.5 percentage points to £1.95 trillion, exceeding GDP.

As traders digest today’s economic data, they will also be looking for any developments in Europe and its response to the coronavirus outbreak.

European shares opened higher ahead of the European Council’s meeting to discuss the EU recovery fund. The pan-European Stoxx 600 rose 0.81 per cent, while Germany’s Dax is up 0.95 per cent.

German-listed Lufthansa has gained near three per cent on signs of movement in its stalled government bailout.

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Read more: UK borrowing surges to a record £103.7bn in lockdown, as debt surpasses GDP in May

BP and Royal Dutch Shell were among this morning’s biggest risers as oil prices rose on news that Opec and allies have pledged to meet their supply cut commitments.

BP rose 1.72 per cent, while Shell climbed 1.67 per cent.

Retail sales rebound

Analysts had anticipated figures to show a 6.3 per cent rise in May after sales tumbled a record 18.1 per cent in April. Instead, ONS figures showed sales increased 12 per cent last month.

“The month-on-month increase is worth keeping in perspective given April represented the height of the lockdown and spend remains well down on pre-pandemic levels,” said Russ Mould, investment director at AJ Bell.

However, FTSE investors may take some comfort in that the figures only reflect the start of lockdown measures easing.

“With unemployment low and the labour market supported by the government’s furlough scheme, there is a good chance that retail sales could remain buoyed for the coming month,” said Fiona Cincotta, market analyst at Gain Capital.

The boost in May will likely further improve as lockdown measures ease and non-essential retail opens.

Second wave fears exert little pressure on FTSE 100

Concerns about a second wave of coronavirus have come to the fore this week. Beijing imposed another lockdown after a cluster of cases originating from a wet food market.

Infections are also rising in the US with California and Florida both registering their biggest one-day rise in cases yesterday.

However the fears are having little effect on the FTSE 100 and global stocks more generally.

Neil Wilson, chief market analyst at Markets.com, suggests the fears are “not exerting too much pressure as investors start to get used to rising case numbers”.

“Remember it’s not cases that count, it’s the lockdown and people’s fear of going out that hurts the economy and corporate earnings.”

US stocks open higher on hopes of recovery

Wall Street’s main indexes opened higher as investors shrugged off the increase in new cases.

Traders are betting on a swift economic recovery despite jobless claims rising by 1.51m yesterday, a decline on the previous week but more than economists had expected.

The Federal Reserve’s plan for individual bond purchase at the start of this week has helped Wall Street stay afloat after last week’s steep selloff.

The Dow Jones gained 175 points – 0.67 per cent – while the benchmark S&P 500 index is up 0.75 per cent. The tech-focused Nasdaq has climbed 1.02 per cent to reach near record highs.

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