The FTSE 100 finished the week on a high note after positive US data, including a better-than-expected report on retail sales.
Initially London stocks declined following worse-than-expected UK construction data and a warning from the International Monetary Fund about the possible impact a vote by Britain to leave the European Union would have on the economy.
UK construction output fell more than expected in March. Output dropped 3.6% month-on-month in March compared to a 0.9% fall in February and analysts’ forecasts for a 3.2% decline.
IMF chief Christine Lagarde said if Britain voted to leave the EU in the 23 June referendum it would have “pretty bad to very, very bad” consequences including a stock market crash and steep fall in house prices.
Helping equities to recover in the afternoon was a batch of uplifting US data.
US retail sales jumped 1.3% last month, the largest gain since March 2015, the Commerce Department said. It compared to a 0.3% decline in March 2016 and analysts’ estimates for a 0.8% increase in April.
Fed Chair Janet Yellen will be well aware that the US consumer is the engine room of the world’s largest economy, and downbeat comments from a number of large department stores in recent days could signal tough times ahead for the off-line retail sector.
However, today’s encouraging numbers mean that many are expecting consumer confidence to remain strong, and there are signs that the Fed is looking closely at raising borrowing rates again. Global uncertainty continues, but the US economy is actually in pretty good shape.
A separate report showed consumer confidence improved more than anticipated in May. The University of Michigan’s preliminary estimate for its consumer confidence index rose to 95.8 in May, exceeding forecasts for a reading of 89.5 and following the previous month’s 89.0.
In the eurozone, the economy grew less than expected in the first quarter, according to the flash estimate from Eurostat. Euro-area gross domestic product rose 0.5% in the first three months of the year compared to the fourth quarter. Analysts had pencilled in 0.6% quarter-on-quarter growth in the first quarter following a 0.3% gain in the previous three months.
Meanwhile, oil prices dropped after Russian Energy Minister Alexander Novak said on Thursday that he didn’t see the oil market balancing out until the first half of 2017, Reuters reported. Brent crude fell 0.81% to $47.69 per barrel.