LONDON MARKETS: FTSE 100 Powers To Fresh Record As Dow 25,000 Inspires European Stock Rally

By Sara Sjolin, MarketWatch Features Dow Jones Newswires

Retailers under pressure again after store prices fall in the key December shopping season

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U.K. stocks scored fresh a record on Friday, driving higher after another round of all-time highs in the U.S. in the previous session. Stocks stayed higher after the closely watched U.S. jobs report missed expectations.

Retail stocks suffered, after an industry body's report showed store prices fell during the key Christmas shopping season.

What is the market doing: The FTSE 100 index added 0.4% to end at 7,724.22, taking out the previous all-time closing high of 7,695.88 set on Thursday. For the week, the London blue-chip benchmark added 0.5%.

The pound traded at $1.3565, compared with $1.3552 late Thursday in New York.

What is driving the market: Friday saw a continuation of the positive trading mood that has boosted global equity markets this week, after U.S. stocks ended at records again on Thursday (http://www.marketwatch.com/story/dow-on-track-for-25000-milestone-as-global-stock-rally-stays-strong-2018-01-04) and headed for fresh all-time highs on Friday. The Dow Jones Industrial Average rallied to close above 25,000 for the first time ever in Thursday's session.

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Stocks in the U.K. maintained gains after the U.S. employment report showed fewer-than-expected jobs (http://www.marketwatch.com/story/us-adds-148000-jobs-in-december-2018-01-05) were added by the American economy in December, while wage growth remained disappointing. Analysts had said a strong reading on jobs and wage growth would bolster the case for the Federal Reserve to raise interest rates, which could influence financial markets globally.

As the dollar typically rises when rates go up, that has implications for the multinationals listed in the U.K., as they do business in the U.S. and take payments in U.S. currency.

Retail pain: Closer to home, retail stocks were in focus again. A report from the British Retail Consortium (https://brc.org.uk/news/2017/december-discounts-spur-shop-price-slide) out Friday showed U.K. store prices fell 0.6% in December (https://brc.org.uk/news/2017/december-discounts-spur-shop-price-slide) year-over-year, as retailers offered discounts at the beginning of the Christmas month.

The downbeat update--a signal that consumers are keeping a tighter grip on wallets--comes a day after department store chain Debenhams issued a profit warning.

"With consumer confidence wavering and unpredictable levels of demand, many nonfood retailers have been keeping prices low to stimulate spending, which will undoubtedly have come at a cost to margins," said Mike Watkins, head of retailer and business insight at Nielsen, in a BRC statement.

What are strategists saying: "The first week of the year has proceeded in a very similar fashion to 2017, as equities continue to rally despite further outflows from funds," said Chris Beauchamp, chief market analyst at IG, in a note.

"Stock markets in the U.K. and U.S. have all clocked up fresh record highs today, while Europe has put in a good showing with healthy gains across the continent. The market shook off a jobs report that was disappointing on the headline number, with the upward revision to November's number helping to reassure investors," said Chris Beauchamp, chief market analyst at IG, in a note.

Stock movers: Retailers and supermarkets mostly declined on Friday. J Sainsbury PLC (SBRY.LN) fell 0.5%, Tesco PLC (TSCO.LN) (TSCO.LN) dropped 0.7% and do-it-yourself retailer Kingfisher KGEPLC (KGF.LN) dropped 0.6%.

Off the FTSE 100, Debenhams PLC (DEB.LN) slid 4.7%, building on the 15% plunge from Thursday after its sales update.

(END) Dow Jones Newswires

January 05, 2018 12:34 ET (17:34 GMT)