By Carla Mozee, MarketWatch

Retail shares gain ahead of monthly sales update

U.K. stocks edged higher Wednesday as retail shares gained ahead of a monthly sales update, with investors focused on the U.S. Federal Reserve policy decision due later.

The FTSE 100 index trudged up 0.1% to 7,282.85, with the consumer services, oil and gas, and financial groups advancing. But consumer goods, basic materials and health care stocks dipped into the red. On Tuesday, the London benchmark rose 0.3%. (http://www.marketwatch.com/story/ftse-100-gets-a-lift-from-supermarket-stocks-softer-pound-2017-09-19)

Shares of Kingfisher PLC (KGF.LN) , whose brands include Screwfix, jumped 6% to lead in price performance Wednesday. The home improvement retailer said it is on track to meet targets in the second year of its five-year restructuring plan, as it raised its dividend. But Kingfisher's first-half profit fell 6% (http://www.marketwatch.com/story/kingfisher-pretax-profit-hurt-by-weak-french-sales-2017-09-20), and it stayed cautious in its outlook for its core U.K. and French markets.

Retail sales in store: U.K. retail sales figures for August should signal how well consumers are holding up, with the report set for release by the Office for National Statistics at 9:30 a.m. London time, or 4:30 a.m. Eastern Time. Analysts polled by FactSet expect a 1.2% increase in sales on the year.

"Retail sales have been unusually volatile in 2017, but beneath the noise, there is a clear slowdown in growth underway, consistent with other measures of consumer spending and the real income squeeze underway as a result of rising import prices. Today's August data should be consistent with that underlying trend," said Adam Cole, chief currency strategist at RBC Capital Markets, in a note.

Ahead of the report, shares of department store chain Marks & Spencer Group PLC (MKS.LN) were up 0.8%, and apparel and home furnishings seller Next PLC (NXT.LN) picked up 0.4%.

Fed ahead: The U.S. Federal Reserve is widely expected to say it will start reducing its $4.5 trillion portfolio of government securities in its policy decision later Wednesday. An interest-rate hike isn't expected at the end of the central bank's two-day meeting, and investors only see a 56% chance the Fed will raise rates in December (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html/), according to CME Group.

"According to their last projection, the Fed expected seven rate hikes by the end of 2019. However, in the new forecast, the market is widely expecting them to drop one interest rate hike," said Naeem Aslam, chief market analyst, at ThinkMarkets UK, in a note.

"Anything which deviates from the Fed's plan would spark concern for the markets. We do think that another rate hike by the end of this year still has 40% chance, however the upcoming economic data is going to keep traders on their toes, due to the massive footprints of hurricanes," he said, referring to the recent Hurricanes Irma and Harvey.

The Fed policy decision is due at 7 p.m. London time, or 2 p.m. Eastern Time. The pound bought $1.3536 compared with $1.3511 late Tuesday in New York.

Stock movers: Babcock International Group PLC (BAB.LN) shares drove up 2.3% after the infrastructure support company backed its fiscal 2018 forecast (http://www.marketwatch.com/story/babcock-international-reiterates-fy-2018-outlook-2017-09-20).

Diageo PLC (DEO) shares fell 1.8% after the liquor maker said it expects first-half organic sales growth to be hit by the later timing of the Chinese New Year (http://www.marketwatch.com/story/diageo-sales-to-be-hit-by-later-chinese-new-year-2017-09-20) and by the expected impact of a ban on selling alcohol along highways in India.

 

(END) Dow Jones Newswires

September 20, 2017 04:16 ET (08:16 GMT)

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