BUSINESS LIVE: Consumer confidence improves as retail sales grow

Dan Ridsdale, director of TMT, Edison Group:

‘Microsoft Corp. appears to be on the verge of achieving a significant victory with its $69 billion acquisition of Activision Blizzard Inc., in what would be a welcome turnaround and a reminder that the UK is an attractive place to do business.

‘Microsoft’s strategic offer to divest some gaming rights to Ubisoft Entertainment SA, aimed at alleviating antitrust concerns, seems to have appeased the CMA, with Microsoft also overcoming an FTC court challenge and obtaining EU approval with behavioural conditions.

‘The acquisition could prove transformative for Microsoft’s gaming vertical, particularly in the mobile games segment, a domain where Microsoft has traditionally underperformed.

‘This could set the stage for Xbox chief, Phil Spencer, to actualise his strategic vision unveiled in January 2021, albeit in a market environment that has undergone significant paradigm shifts.’

The FTSE 100 is trading 0.1 per cent lower this morning as investors weigh indications of higher-for-longer interest rates from major central banks a day after the Bank of England paused rate hikes.

AstraZeneca has climbed more than 1 per cent after the drug maker said its experimental precision drug had slowed the progression of breast cancer in a late-stage trial. The broader pharma and biotech index has gained 1 per cent.

Phoenix Group has fallen 3.4 per cent to the bottom of FTSE 100, after the Financial Times reported the life insurer has bought a stake in Hambro Perks and J.P. Morgan downgraded the stock.

Mothercare expects to complete a refinancing shortly and will remain in discussions with stakeholders and financing partners to ensure adequate financing, the British baby products retailer said on Friday.

In May, the company started discussions with its lender to change, renegotiate or refinance its debt facility due to high interest rates and said it may need waivers to future covenant tests.

Samantha Phillips, partner at McKinsey & Co:

‘Looking ahead to the golden quarter, the next three months will be pivotal. Consumers are likely to spend cautiously with high winter energy bills in mind.

‘And retailers will need to stay in tune with the functional and emotional needs of their customers.

‘It will be important to monitor where consumers are willing to make trade-offs and where they are willing to stretch their budgets and spend. Those that can use these insights to inform product availability, pricing and promotions will be better placed to capture a greater share of the customer’s wallet.’

Neil Birrell, chief investment officer at Premier Miton investors:

‘UK retail sales figures for August came in much as expected which will please the Bank of England after its decision to keep interest rates unchanged yesterday.

‘With inflation coming in below expectations earlier in the week, strong consumer spending would not have been welcome.

‘The UK economy appears to in reasonable shape given everything that is being thrown at it and sharp eyes will remain on the data as we monitor the impact of all the interest rate increases we have seen.’

Fresh data shows UK consumer confidence has improved to its strongest since the start of 2022, while separate figures show retail sales ticked higher last month thanks to better weather conditions.

The GfK consumer sentiment indicator rose for a second month in a row to -21 in September, the highest since January last year, from -25 in August although it remained below the average of -10 for the survey, which has been running since 1974.

Economists had forecast a fall to -27.

Meanwhile data from the Office for National Statistics shows UK retail sales grew 0.4 per cent in August, just missing forecasts of 0.5 per cent growth.