THE pound took a hit on Friday after fresh data showed a dismal drop in December retail sales.

Sterling was down around 0.3 per cent against the US dollar at 1.385, having climbed as high as 1.394 in morning trading ahead of the release.

It had been gaining ground on a weak dollar as American politicians continue to grapple over a stopgap bill that would avert a government shutdown, but was knocked after the Office for National Statistics said UK retail sales tumbled 1.5 per cent month-on-month, marking the worst December performance since 2010.

Loading article content

Lukman Otunuga, a research analyst at FXTM, said an "unsavoury combination" of rising inflation and tepid wage growth had "sapped" consumer spending power.

"With wage growth consistently lagging behind inflation and putting the squeeze on household incomes, concerns are likely to heighten over the sustainability of Britain's consumer-driven economic growth," he said.

"It is becoming clear that sterling's appreciation this month had nothing to do with a change of sentiment towards the UK economy but rather ongoing dollar weakness and market optimism over a soft Brexit."

Versus the euro, the pound was down 0.2 per cent at 1.132.

The weaker pound buoyed the FTSE 100, which ended the day up nearly 0.4 per cent or 29.83 points at 7,730.79, as international firms on the blue chip index tend to benefit when foreign currencies are stronger.

Across Europe, the French Cac 40 and German Dax closed higher, up 0.58 per cent and 1.15 per cent respectively.

Brent crude prices fell more than 0.7 per cent to around $68.57 per barrel as investors were spooked by warnings from the International Energy Agency, which said US oil production could hit record highs this year.

It threatens the terms of an Opec agreement to cap production meant to tackle the global energy glut.

In UK stocks, Carpetright shares were floored, dropping nearly 40 per cent or 64.9p to 99.6p after the retailer issued a profit warning on the back of tough Christmas trading.

Total group sales slid 2.3 per cent lower, with the company blaming reduced consumer confidence, and it slashed its profit outlook from around £13.8 million to £16.7m, to between £2m and £6m.

The news knocked B&Q owner Kingfisher to the bottom of the FTSE 100, ending the day down 7.9p at 336.1p.

A separate profit warning by funeral firm Dignity sent shares down 50 per cent or 954p to 962p, as it plans to overhaul its pricing strategy to protect market share and fend off fierce competition.

It also plans to launch a "rigorous review" of the business to help drive down costs.

Meanwhile, a 9.7 per cent drop in like-for-like store sales in the 13 weeks to December sent Bonmarche shares tumbling 21.5p to 105p. It said total sales over the period fell 5.5 per cent.

However, the firm was more upbeat about its online performance, where sales rose 28.5 per cent in the period.

The biggest risers on the FTSE 100 were easyJet up 71.5p at 1,584.5p, Intercontinental Hotels Group up 124p at 4,928p, NMC Health up 82p at 3,280p, and Rentokil Initial up 7.3p at 316.1p.

The biggest fallers were Kingfisher down 7.9p at 336.1p, Next down 82p at 4,898p, Centrica down 1.95p at 139.05p, and BP down 6.6p at 509.9p.