Shares started the week strongly, with the FTSE 100 index up 0.3% on Monday to its highest level for a month, and the FTSE 250 at a record high.
The large-cap mining sector hit its highest in two years, with Rio Tinto up 3% and Glencore up 2.6%.
Primark-owner AB Foods gained 1.6% on positive broker comment.
Meanwhile, US indices reached new highs on hopes about Donald Trump’s promised tax reforms.
Tuesday saw Rolls-Royce off 4% after reporting heavy losses, while Centrica was down 1% on pressure to cut energy bills.
But Tui rose nearly 6% after the travel company said its first-quarter loss narrowed and it expected underlying earnings to grow 10% for the full year.
The FTSE 100 gained 0.5% on Wednesday, helped by financial stocks on growing speculation of a US rate rise next month.
Equipment hire business Ashtead climbed to a record high on US tax reform hopes. But Tui dropped back 7.2% after Tuesday’s rise.
Blue chips including AstraZeneca, BP and Royal Dutch Shell went ex-dividend, feeding a 0.3% drop in the FTSE 100 on Thursday.
Coca Cola HBC led the gainers, up 4.9% to a record high on better-than-expected results. Meanwhile mid-cap Cobham slumped 15% on a fifth profit warning.
The FTSE 100 was down in early trading on Friday ahead of retail sales figures..
Company Focus: Rolls-Royce
Rolls-Royce reported its biggest ever loss on Tuesday, citing the pound’s fall and the cost of settling corruption charges.
The jet engine maker reported a pre-tax loss of £4.6bn for 2016, including a £4.4bn derivatives’ write-down following the fall in the value of sterling, and a £671m settlement for historic bribery and corruption claims.
Stripping out these one-offs, underlying profit slumped 49% to £831m, from £1.4bn the previous year.
Warren East, chief executive since 2015, said: “While we have made good progress in our cost-cutting and efficiency programmes, more needs to be done to ensure we drive sustainable margin improvements within the business.”
The group expects revenue this year to be only “marginally higher” than in 2016. Difficulties in its marine business are expected to continue due to weak oil and gas markets.
The final dividend was held at 7.1p per share..
The European Commission (EC) upgraded its forecast for UK growth in 2017 to 1.5%, from 1% previously. Forecasts for the eurozone area were also revised up to 1.6% for 2017 and 1.8% for 2018.
Consumer inflation in the UK rose at its highest level since 2014 in January, according to Office for National Statistics. The CPI index rose 1.8% in the year to January, from 1.6% in December.
Meanwhile, producer price inflation was up a hefty 20% as the weak pound pushed up the cost of imported materials.
The ONS said that CPI inflation is likely to rise above the Bank of England's 2% target in coming months. The Bank’s own forecasts show it expects inflation to hit 2.7% this year, before falling back to 2.6% in 2018.
On Tuesday Janet Yellen, chair of the US Federal Reserve, prompted a rally in financial stocks as she hinted that a rate rise could come as soon as March due to improving US economic data.
Waiting too long before raising rates could be “unwise” and force the Fed to raise rates more rapidly later on, she said.
Yellen’s comments came ahead of data showing that US inflation had hit 2.5%, its highest in five years.
UK wage growth slowed to 2.6% in the three months to December, despite unemployment remaining at a low and amid continuing jobs growth.
The headline unemployment rate held steady at 4.8% and employment was up 37,000 to a new high of 31.84m, or 74.6% of people of working age.
The ONS said the jobs market "appears to be edging towards full capacity", with the employment rate for women reaching 70% for the first time.
Rising food and fuel prices led to a sharp fall in retail sales in January, indicating that higher prices are starting to bite.
Seasonally adjusted volumes, excluding fuel, were 0.2% lower in January than in December, the ONS reported.
This was significantly weaker than analysts had predicted, and followed a drop in sales in December.
“In the three months to January 2017, retail sales saw the first signs of a fall in the underlying trend since December 2013,” said Kate Davies, ONS senior statistician.
Samuel Tombs of Pantheon Macroeconomics said: “The failure of retail sales in January to rise at all after December’s 2.1% month-to-month drop demonstrates that consumers’ spending has shifted down several gears in response to slowing employment growth and rising inflation.”.
Company announcements that caught our attention this week
Key company diary dates
Best & worst performing sectors (rel. to FTSE 350)*
Best & worst performing stocks*
* Weekly movements up until close of business Thursday.
Main source of information: Company Report and Accounts, Bloomberg
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