By Carla Mozee, MarketWatch

British retail sales slow more than expected in January

U.K. stocks leapt Friday, closing with their best weekly performance in 14 months as London's blue-chip index followed the recovery effort for battered U.S. equities.

FTSE stocks held on to gains after the U.K. government reported a larger-than-expected slowdown in retail-sales growth last month.

How markets performed

The FTSE 100 rose by 0.8% to 7,294.70. The telecom and utility groups topped advancers, while only the basic materials sector lagged. On Thursday, the benchmark rose 0.3% (http://www.marketwatch.com/story/ftse-100-moves-solidly-higher-as-oil-and-mining-stocks-rise-2018-02-15), a third straight winning session.

British retail sales missed expectations, but sterling remained on track for a weekly jump of 1.8% against the U.S. dollar . The pound bought $1.4060, down from $1.4100 late Thursday in New York.

The yield on the 10-year gilt dropped 8 basis points to 1.57%, according to Tradeweb. Yields fall when prices rise.

What moved markets

U.K. and broader European markets stuck firmly in positive territory Friday, appearing to be taking their cue from Wall Street. U.S. stocks continued to run higher for a sixth straight session on Friday (http://www.marketwatch.com/story/dow-ready-to-hold-above-25000-as-us-stocks-line-up-best-week-more-than-a-year-2018-02-16), with investors willing to embracing risk going into the Presidents Day holiday in the U.S. on Monday.

After the recent meltdown in global equities, the FTSE 100 ended this week 2.9% higher, its best week since December 2016. That's also first gain after four consecutive weekly losses. The S&P 500 , the Dow Jones Industrial Average and the Nasdaq Composite Index were also poised for their strongest weekly performances in years.

The recent global selloff in equities is seen as prompted partly by a rise in U.S. bond yields amid signs of an uptick in inflation. But after the release this week of stronger-than-expected U.S. inflation data (http://www.marketwatch.com/story/cpi-surges-05-in-january-but-yearly-rate-of-inflation-unchanged-2018-02-14), investors scooped up beaten-down stocks.

Read:This market selloff was overdue, but now it looks overdone, strategists say (http://www.marketwatch.com/story/this-market-selloff-was-overdue-but-now-it-looks-overdone-strategists-say-2018-02-10)

Also check out: More investors looking to cut U.K. assets as Brexit uncertainty persists (http://www.marketwatch.com/story/more-investors-looking-to-cut-uk-assets-as-brexit-uncertainty-persists-2018-02-16)

What strategists were saying

"Where Wall Street goes, other markets follow, and this bounce back from last week's lows is no different. Traders are quickly getting used to higher bond yields, higher inflation and another round of hikes in global interest rates that will follow, so much so that U.S. stocks are recovering twice as fast as in London," said Lee Wild, head of equity strategy at Interactive Investor.

"Markets will remain volatile, for sure, but we've just found out that big investors can't stay out of this market for long, and demand for equities typically picks up in the weeks before tax year-end," Wild said in a note.

Economic data

Growth in consumer spending slowed more than expected in January. Retail sales increased 0.1% on the month (http://www.marketwatch.com/story/uk-retail-sales-growth-slows-more-than-expected-2018-02-16), the Office for National Statistics said, missing expectations of 0.6% in a Wall Street Journal survey of analysts. The result comes after sales dropped 1.4% in December.

Sales rose 1.6% year-over-year, lower than the 2.4% rate in the year-ago period.

"The Bank of England says wage growth is on an upward trajectory, while inflation may well have peaked. This means we could see an end to falling real wages in the coming months, which would provide a welcome fillip to cash-strapped households," said Ben Brettell, senior economist at Hargreaves Lansdown, in a note.

"Assuming pay growth figures over the next couple of months back up this theory, it still looks like the Monetary Policy Committee will have the confidence to raise interest rates to 0.75% in May," he added.

Stock movers

Segro PLC shares (SGRO.LN) jumped 6.5%, their best percentage rise since June 2016, after the property-investment company raised its dividend by 6.1% (http://www.marketwatch.com/story/segro-2017-profit-more-than-doubles-2018-02-16-24853926), and said pretax profit for 2017 more than doubled.

Among the handful of FTSE decliners, Randgold Resources PLC (RRS.LN) fell 2.1%, copper producer Antofagasta PLC (ANTO.LN) gave up 1.9% and cruise operator Carnival PLC (CCL.LN) ended 1.1% lower.

 

(END) Dow Jones Newswires

February 16, 2018 12:18 ET (17:18 GMT)

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