London pre-open: Stocks to fall as investors mull retail sales, consumer confidence

London stocks were set to drop at the open on Friday following solid gains a day earlier, as investors mulled a slide in consumer confidence but better-than-expected retail sales data.

The FTSE 100 was called to open down around 63 points.

Figures released earlier by the Office for National Statistics showed retail sales hit their highest level in more than two years in August, ahead of expectations.

Retail sales volumes rose 1% in August, following an upwardly revised 0.7% uptick in July. Volumes were at their highest levels since July 2022. Analysts had been expecting a 0.4% increase.

Elsewhere, a survey showed that consumer confidence fell sharply in September despite the more stable economic backdrop, as people nervously wait on next month’s Budget.

The latest GfK consumer confidence index came in at -20, a seven-point slide on August’s reading.

All sub-measures fell. The index for expectations for personal finances in the coming 12 months fell nine points to -3, while the measure of predictions for the economic situation tumbled 12 points to -27.

The major purchase index lost 10 points to -23, while the savings index also fell 10 points, to 23.

Prior to September’s survey, consumer confidence had been improving, boosted by inflation returning to near target, a cut in interest rates earlier in the summer and a new government.

However, economic growth appears to have stalled. Recent data showed GDP stagnated for the second consecutive month in July, disappointing analysts who had been expecting in a 0.2% uplift.

The new government is also due to announce its first Budget next month, and has already warned of a £22bn black hole in the public finances.

Neil Bellamy, consumer insights director at GfK, said: "Despite stable inflation and the prospect of further cuts in the base interest rate, this is not encouraging news for the UK’s new government.

"Strong consumer confidence matters because it underpins economic growth and is a significant driver of shoppers’ willingness to spend.

"Following the withdrawal of the winter fuel payments, and clear warnings of further difficult decisions to come on tax, spending and welfare, consumers are nervously awaiting the Budget decisions on 30 October."

In corporate news, Volution said it had agreed to buy Fantech Group in Australasia for up to AUD280m (£144m).

Fantech, which includes the Fantech, Ideal Air, NCS Acoustics, Air Design, Major Air, Systemaire and Burra Steel brands, is a provider of both commercial and residential ventilation in Australia and commercial ventilation solutions in New Zealand.

For the year ended 31 March 2024, the business reported audited revenue of AUD177m (£90.8m) and EBITDA of AUD33.3m (£17.1m).

Volution said the deal is consistent with its "long-established strategy of acquiring leading ventilation brands to extend our routes to market and builds on the group's successful expansion in the region since our first acquisition of Simx in March 2018".

Investec Group flagged a positive first-half financial performance in an update, with expected pre-provision adjusted operating profit between £520m and £550m, representing a 6.7% to 12.9% increase.

The group said its performance was influenced by strategic actions, such as the Rathbones combination, leading to impacts on earnings and a lower basic earnings per share due to prior one-off gains.

Despite challenges in the UK market, it said strong revenue momentum, improved cost-to-income ratio, and solid credit quality had positioned it well for growth.