Retailers to set UK stock market pace

The health of Britain's retailers over the Christmas trading period is likely to command most attention in the UK stock market next week as companies from the supermarkets to luxury goods sectors issue trading updates.
Britain's biggest supermarkets group Tesco, which has an update due out on Tuesday, is expected to have done well stocking UK consumers' Christmas food and drink shelves, as well as tapping into demand for electrical goods as gifts.
Analysts, however, say rival J. Sainsbury, which issues a trading statement on Monday, may have felt the pinch of competition from Tesco and ASDA, part of US retailing empire Wal Mart.
Khuram Chaudhry, UK strategist at investment bank Merrill Lynch, said investors will be looking closely at updates from retailer Marks & Spencer and budget clothing chain Matalan, both due out on Wednesday, to see how much impact discounting in the run-up to Christmas has had.
"If you look at those two stocks they've come off of late, partly because of question marks over the consumer and the direction of interest rates. When you look at the core of their businesses if you get upwards surprises on sales data...there could be some renewed interest," he said.
By early afternoon on Friday the FTSE 100 index stood at 4,477 points, down 0.7 percent on last Friday's close, although Andrew Hobson, fund manager at Exeter Asset Management said he detected a fair amount of optimism in markets.
"Potentially there's a potent mix of positive factors in the market's favour. I think the valuation is fine, the political background is stabilising, there's earnings growth. The market could potentially have a very good year," he said.
Both Hobson and Chaudhry highlighted US jobs data due next week as a key market factor, with investors keen to see that economic recovery is translating into a rising workforce.
"Any signs to suggest that the increase in (economic) activity has been translated into jobs would be a positive - evidence that the recovery is becoming embedded by firms taking on more people," said Hobson at Exeter.
"Any indication of where that (jobs) data's going is going to be key. In the last few months the data has become "less bad" which is encouraging but it's whether that trend is going to turn positive or not," said Merrill's Chaudhry.