UK retail sales figures disappoint

UK retail sales were somewhat on the disappointing side, failing to live up to expectations with growth of 4.8% versus the forecast 5%.

The Christmas period will have given a boost to December’s numbers, while January had to cope with poor weather and the traditional post-Christmas time of domestic austerity. Nonetheless, the picture looks better for the UK economy at the moment, with growth still looking reasonable and weaker inflation helping to make life easier for consumers.

In mid-morning trading, the FTSE 100 is 30 points higher, following the lead of US markets which enjoyed yet another good day. London’s main index holds above the 6800 level for now, putting it in a position to challenge the January high of 6867; providing the positive mood is sustained into the final week of February. A strong session in Tokyo and a boost for telecoms giant Vodafone has put the index in fine form, suggesting that the current rally may have a little further to run.

Vodafone remains the darling of UK investors this morning, rising over 2% as it receives favourable coverage from various brokers of the back of the sale of its stake in Verizon Wireless. Strong capital growth and a healthy dividend mean that this company will continue to retain a special place in the hearts of many.  

Meanwhile, Royal Bank of Scotland is providing some excitement in advance of its earnings next week, as news comes through that the embattled behemoth will announce yet another restructuring plan. Despite the best efforts of its board, we still have no answer to the question of how you solve a problem like RBS.

This has not been a week for good housing data from the US, and today’s existing home sales numbers for January are unlikely to liven up the situation. Much of the US spent the first month of the year either in the grip of severe storms or under a blanket of snow, which is not exactly conducive to house hunting. At least we have merger activity to keep us occupied while, for the moment, most people seem happy to view the January volatility as the needed correction that will allow the market to push higher.

Ahead of the open, we expect the Dow Jones to start around 25 points higher at 16,160.

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