London stocks remained in the red by midday on Thursday, weighed down by weakness in the mining sector and a stronger pound, as investors digested better-than-expected UK retail sales data and a hawkish Fed update, ahead of the latest policy announcement from the European Central Bank.
The FTSE 100 was down 0.5% to 7,662.04, while the pound popped up 0.4% against the dollar
to 1.3423 and 0.1% versus the euro to 1.1350 after data from the Office for National Statistics showed that UK retail sales rose more than expected in May thanks to boosts from warmer weather, the royal wedding and the FA Cup.
Retail sales rose 1.3% month-over-month in May, beating the 0.5% the month before and lower than the 2.4% expected. But compared to last year, retail sales were up 3.9%, ahead of the 2.4% consensus estimate. Excluding fuel, sales were up 1.3% on the month versus the 0.3% expected and up 4.4% on the year compared to 2.5% forecast.
Overall growth was boosted by sharp increases in sales of clothing, sporting goods and garden items, up 1.7%, 3.3% and 6.2% month-to-month, respectively.
The increasing online shift was highlighted as the proportion of online spending in clothing stores has grown at a much faster rate in the last 14 months, accelerating to 17.6% from 14.7% in March 2017.
"The jump in retail sales in May has all the hallmarks of a weather-related blip, rather than a sustainable pick-up in spending," said economist Sam Tombs at Pantheon Macroeconomics, noting that average temperatures were 1.8 degrees above their 1970-to-2016 May average, persuading households to purchase items that they forewent in February and March when the weather was unusually cold.
Meanwhile, investors were digesting a 25 basis points rate hike from the Fed overnight. The increase, which was the second this year, was as expected. The central bank also upgraded its forecasts for this year and the next and said it expects to deliver another two rate hikes this year and another three in 2019. Markets had been pricing in three moves on rates this year.
Chris Beauchamp, chief market analyst at IG, said: "Four rate hikes for 2018 does not necessarily suggest that the end of the great bull market is at hand, but it has been enough to knock equities back this morning.
"After years of stasis in central banks, the developments are coming positively thick and fast. Jerome Powell's Fed is clearly happy with the situation, feeling confident enough to knock the pace up a notch, and later today we will see if the ECB are in the mood to make a few changes too."
Market participants are expecting the ECB to make an announcement on quantitative easing tapering when it makes its rate decision at 1245 BST.
Mining stocks were under pressure following the release of disappointing Chinese retail sales and investment data, with Antofagasta, Anglo American, Glencore and BHP all weaker.
Unilever was the standout loser after the company said at a Deutsche Bank conference that it was unlikely to remain in the FTSE indices after its move to a single headquarters in the Netherlands. Also, according to Bloomberg, the consumer goods giant said sales growth in the first half is likely to be below the full-year forecast range of 3% to 5%.
Consumer products peddler PZ Cussons was firmly in the red after saying in a trading update that pre-tax profit for the full year was likely to be at the lower end of the £80m to £85m range it announced in March.
Pearson was lower on the back of a Barclays downgrade and Anglo American retreated as it agreed to sell a stake in its Quellaveco copper project in Peru to Mitsubishi Corporation for $600m.
Rathbone Brothers edged down after announcing the acquisition of Scotland's largest independent wealth manager, Speirs & Jeffrey, for an initial cash and shares
consideration of £104m.
On the upside, Rolls-Royce was a high riser after it announced 4,600 job cuts - mainly in the UK - to save £400m a year in the latest round of restructuring under chief executive Warren East.
GlaxoSmithKline was on the rise after it said that its two-drug treatment for HIV met its main goal in late-stage studies. Also in the news, Mylan said the US Food and Drug Administration will reject its generic version of Glaxo's blockbuster asthma drug Advair after finding "minor deficiencies".
Aveva surged after its full-year earnings per share came in well ahead of expectations, while Sky gained as Comcast made a $65bn bid to buy 21st Century Fox's entertainment assets overnight, trumping an earlier takeover agreed with Disney for just over $52bn.
Safestore turned higher following the release of broadly in-line interim results.
Persimmon, WPP, 3i Group, Severn Trent, Mediclinic, NMC Health, UBM, Electrocomponents, Pets at Home, Shaftesbury and Stobart were among the companies whose stock went ex-dividend.
FTSE 100 (UKX) 7,662.04 -0.54%
FTSE 250 (MCX) 21,163.91 -0.32%
techMARK (TASX) 3,572.54 0.52%
FTSE 100 - Risers
Rolls-Royce Holdings (RR.) 854.40p 3.11%
Just Eat (JE.) 825.80p 1.95%
Centrica (CNA) 151.55p 1.85%
Smurfit Kappa Group (SKG) 3,008.00p 1.76%
BT Group (BT.A) 211.65p 1.75%
Royal Mail (RMG) 496.90p 0.95%
GlaxoSmithKline (GSK) 1,558.80p 0.88%
Kingfisher (KGF) 311.10p 0.55%
Hargreaves Lansdown (HL.) 2,070.00p 0.53%
Micro Focus International (MCRO) 1,360.00p 0.52%
FTSE 100 - Fallers
Unilever (ULVR) 3,984.00p -4.00%
Persimmon (PSN) 2,697.00p -3.88%
Severn Trent (SVT) 1,859.50p -3.70%
Relx plc (REL) 1,595.00p -3.63%
Pearson (PSON) 871.80p -2.72%
Antofagasta (ANTO) 1,053.50p -2.59%
Anglo American (AAL) 1,753.20p -2.49%
3i Group (III) 962.40p -2.37%
Glencore (GLEN) 388.60p -2.36%
BHP Billiton (BLT) 1,716.00p -1.88%
FTSE 250 - Risers
Aveva Group (AVV) 2,866.00p 13.19%
Alfa Financial Software Holdings (ALFA) 200.50p 4.86%
Entertainment One Limited (ETO) 349.00p 2.89%
Inmarsat (ISAT) 534.60p 1.98%
Charter Court Financial Services Group (CCFS) 340.80p 1.79%
Caledonia Investments (CLDN) 2,799.00p 1.78%
Card Factory (CARD) 199.70p 1.37%
Bank of Georgia Group (BGEO) 1,904.40p 1.30%
Capita (CPI) 151.50p 1.24%
Dixons Carphone (DC.) 194.65p 1.22%
FTSE 250 - Fallers
PZ Cussons (PZC) 220.40p -5.33%
Senior (SNR) 306.20p -3.65%
Pets at Home Group (PETS) 121.60p -3.57%
Templeton Emerging Markets Inv Trust (TEM) 717.75p -3.27%
RHI Magnesita N.V. (DI) (RHIM) 4,758.00p -2.78%
Intermediate Capital Group (ICP) 1,135.70p -2.77%
Vietnam Enterprise Investments (DI) (VEIL) 442.80p -2.68%
Kaz Minerals (KAZ) 966.71p -2.41%
Thomas Cook Group (TCG) 114.13p -2.37%
IP Group (IPO) 136.80p -2.29%