London's retail recovery picks up speed

The recovery in retailers' shares gathered pace, helped by growing optimism about the sector's exposure to the UK's economic recovery, as the FTSE 100 made a broad-based rally.

The main London market returned from its four-day break with a rise of 1.9 per cent to 6,961.77, a gain of 128 points.

Supermarket shares were buoyant after strong data from the UK services sector added to hopes that the improving UK economy could lift its prospects. Furthermore, analysis from Shore Capital drew attention to upbeat findings from an industry survey into consumer spending power, the Asda Income Tracker.

The research found that "family spending power" was up £16 a week in February. Shore Cap's Clive Black said the rise was helped by "sound income growth and a rising working population alongside the well-versed reduction in essentials inflation, particularly driven by falling motor fuel, home heating and food.

"The ongoing recovery of the consumer economy [is] making life tougher for weaker discounters and better for increasingly competitive major incumbent players, particularly the multiple grocers."

Tesco rose 2.7 per cent to 251p, closing above 250p for the first time since September 2014. J Sainsbury climbed 3.5 per cent to 269.4p. Wm Morrison was up 1.3 per cent at 198.3p.

Marks and Spencer also continued to rally, as the warm reception for its sales resurrection continued.

Jefferies became the latest broker to lift its forecasts for the bellwether retailer, citing a broad-based recovery across the business.

"M&S has seen improvements in-store in all [clothing and homeware] categories with its more premium ranges growing nearly 10 per cent as customer perceptions of style and quality improved," said Caroline Gulliver, equity analyst at Jefferies.

"Meanwhile M&S Food continues to beat the market due to its rate of expansion of Simply Food [outlets] . . . We increase our full-year 2015 earnings and 2015 profit [forecasts] by 3 per cent to 4 per cent, and raise our price target [on the stock] to 625p."

But Andrew Wade, analyst at Numis, was cautious on the outlook for M&S. "Much of the improved performance in the UK operation will be offset by a material impact on international second-half profit from the macroeconomic issues in Russia, Ukraine and Turkey, combined with the weakening in the euro."

M&S shares were 1.3 per cent higher at 561p.

Oil stocks led the main index at sector level as the equity market got the first chance to react to the rebound in Brent crude prices seen over the Easter break.

BG Group made the best single gain of the session, up 6.7 per cent at 910.4p. Royal Dutch Shell rose 3.9 per cent to £20.08 and BP was 2.7 per cent higher at 454.9p.

Heavy fuel user IAG, the parent of British Airways and Iberia, was down 1.2 per cent at 591½ p, the biggest of only three fallers.

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