FTSE 100 Closes Little Changed; UK Retail Sales Post Surprise Growth

The FTSE 100 edged higher on Friday, adding to its longest winning streak in over five years, even as investors digested a surprise uptick in UK retail sales that defied expectations of a decline. The index closed at 8,427.06, up 0.2%, marking its tenth straight gain—the longest streak since December 2019. This resilience came despite a backdrop of escalating trade tensions and mixed signals from consumer spending data.

The modest gains were fueled by a mix of optimism around U.S.-China trade negotiations and strong corporate earnings, notably from tech giant Alphabet, which reported robust first-quarter results. This positive sentiment helped offset concerns over the Bank of England’s recent warning about rising inflationary pressures and the looming April increase in household energy bills.

Meanwhile, the UK’s retail sector provided a brighter-than-expected picture. The Office for National Statistics (ONS) reported that retail sales volumes rose by 0.4% month-on-month in March, surpassing forecasts of a 0.3% decline. Year-on-year growth accelerated to 2.6% from 1.8% in February, with core sales (excluding auto fuel) climbing 3.3% annually. This marked the third consecutive monthly increase, driven by strong performance in clothing and outdoor retailers amid favorable spring weather.

While the data paints a positive picture of consumer spending, the ONS noted that the March figures predate the April 1 surge in household energy and utility costs, which could weigh on future spending. Additionally, supermarket sales lagged, reflecting ongoing price sensitivity among households.

Contradicting the retail sales optimism, a simultaneous drop in consumer confidence to -23—the lowest level in over a year—suggests that households are increasingly cautious about their financial outlook. This divergence raises questions about whether the retail sector’s recent momentum can be sustained amid rising living costs and geopolitical uncertainty.

For investors, the mixed signals point to opportunities and risks in consumer-facing sectors. Retail stocks such as Next and ocado could benefit from the current sales uptick, but their valuations may face pressure if the coming months show a reversal. Meanwhile, the FTSE’s broader gains hint at a market betting on global macroeconomic stability, though recent trade tensions between the U.S. and China could test that optimism.

The FTSE 100’s ten-day streak, its longest since 2019, reflects investor optimism, but the UK retail sector’s surprise March growth—up 0.4% month-on-month against a -0.3% forecast—adds a layer of complexity. While core retail sales surged 3.3% annually, the looming energy bill increases and the drop in consumer confidence to -23 highlight the fragility of this recovery. Investors should monitor the next round of retail data for clues on whether the sector’s momentum can survive these pressures. For now, the market’s focus remains on global trade developments, but the UK’s economic balancing act between resilience and risk is far from over.

In conclusion, while the FTSE’s gains and retail data suggest underlying strength, the path ahead is clouded by inflation, energy costs, and shifting consumer sentiment. The market’s ability to sustain its rally hinges on whether businesses can navigate these headwinds without stifling demand—a challenge that will be tested in the coming months.