UK retail sales rebound as shoppers flock to January sales - as it happened

Retail sales in the UK rose 1% in January as price discounts convinced shoppers to splash out on clothing.

• European shares rise on US China trade hopes
• FTSE hits four-month high
• Trade talks 'to continue next week in Washington'
• US production falls for first time in eight months

2.56pm GMT

Time for a quick recap.

2.39pm GMT

Analysts at Bank of America Merrill Lynch say the timing and outcome of the US trade negotiations with China and the EU are the key focus for markets for the rest of the year.

They write in a note:

Since trade tensions started, we have been optimistic, arguing that no country should want a trade war, but we are now concerned that persistent trade tensions are keeping global growth weak. In this context, a recovery outside the US needs trade deals that will put trade tensions behind, relatively soon.

The risk is that another truce between the US and China, while the US and the EU start discussions on trade in autos and agriculture, will keep uncertainty high, delaying the recovery of the global economy. Our baseline still assumes trade deals, but it makes a difference if deals take place in 1Q, or later in the year.

2.34pm GMT

The opening bell has rung and US shares are higher on trade talk optimism:

2.22pm GMT

Figures just out show US manufacturing output fell 0.9% in January, which was worse than the 0.1% predicted by economists.

The figure for December was also revised down, to show a 0.8% rise compared with a previous estimate of 1.1%.

U.S. industrial production slumps in January https://t.co/GxM1cuyF9G

2.02pm GMT

US futures are pointing to a higher open on Wall Street, as US/China trade talk hopes are revived on reports that negotiations will continue in Washington next week:

12.41pm GMT

Time for a quick summary of the corporate news doing the rounds today:

12.01pm GMT

The FTSE 100 is currently at a four-month high, up 0.4% or 26 points at 7,223.

Conor Campbell, analyst at spread-betting firm Spreadex, reflects on the latest developments in the US/China trade talks:

A significant shift in sentiment occurred on Friday morning following the latest trade talks update.

After a few days of discussion in Beijing, President Xi Jinping has said that the talks will continue in Washington next week, both sides still chasing that elusive deal before the ceasefire ceases at the start of March.

11.19am GMT

Here is our full story on those better-than-expected UK retail sales:

Related: High street discounts boost struggling retailers as Brexit nears

11.14am GMT

Reuters brings this report following talks in Beijing this week between US and Chinese trade negotiators:

Chinese President Xi Jinping said on Friday trade talks with the United States will continue in Washington next week and that he hopes the two sides will be able to reach a mutually beneficial deal in the upcoming negotiations, state media reported.

10.36am GMT

Sentiment among European investors has become a little more positive as the morning has gone one.

It seems that traders are clinging on to the merest suggestion of progress between US and China's trade negotiators in Beijing.

Productive meetings with China's Vice Premier Liu He and @USTradeRep Amb. Lighthizer. pic.twitter.com/KxOZffFXAa

10.28am GMT

UK consumers are still in "happy-go-lucky" mood according to Samuel Tombs at Pantheon Macroeconomics.

January's jump in retail sales shows that most households have maintained a happy-go-lucky mentality, despite the fraught political situation. While consumers' confidence is down, this reflects rather fuzzy expectations that Brexit might be costly eventually.

Right now, households' real incomes are being supported by low inflation, a decade-high rate of nominal wage growth and solid employment gains. Low confidence will prompt consumers to hold back from buying cars, booking holidays and moving home, but the high street will be protected.

10.23am GMT

Thomas Pugh, economist at Capital Economics, agrees that the outlook for retail sales in the coming weeks and months is heavily dependent on the Brexit outcome:

In contrast to the Brexit pessimism, which seems to be weighing on other sectors, the rise in retail sales volumes in January implies that consumers are still willing to spend.

Of course, unless a Brexit deal is signed soon, sales could weaken over the rest of Q1.

10.22am GMT

James Smith, an economist at ING bank, warns that the positive retail sales figures mask a tough backdrop for the UK high street:

Brexit uncertainty is likely to keep a lid on spending over the next few months. Despite an improvement in real wage growth, consumer confidence remains at the lowest level since 2013, led by concerns about both the economic climate and personal finances.

There is a risk that, as the Brexit deadline draws nearer, nervousness about the impact of 'no deal' will creep into the consumer mindset. At the very least, shoppers may opt against bigger ticket purchases in the short-term, instead choosing to maintain savings levels.

9.58am GMT

At 4.2%, the annual rate of growth in retail sales is the strongest in more than three years (since December 2016).

9.52am GMT

The stronger-than-expected retail sales have helped the pound a tad, which is now roughly flat against the dollar at $1.2809.

However, Moneycorp's Lee McDarby says investor minds are elsewhere:

Despite Brexit uncertainty and a stuttering economy, consumers have begun 2019 in a buoyant mood. These better than expected results may have been helped by the surprise drop in inflation, putting more money in consumer's pockets.

After a week of poor economic data, these figures are unlikely to have much impact on the pound. Moreover, in today's currency market the strength of Sterling is largely being determined by markets' expectation of a deal or no deal.

9.35am GMT

Rhian Murphy, head of retail sales at the ONS, said price discounts helped to convince shoppers to splash out on clothing in January:

Retail sales returned to growth, with increases across most sectors.

Clothing stores saw strong sales, luring consumers with price reductions with food sales also growing after a slight dip over Christmas.

9.33am GMT

Breaking: UK retail sales rose 1% in January, easily beating expectations of a 0.2% increase.

The figure for December was also revised up, to show a 0.7 fall, compared with the previously estimated fall of 0.9%.

9.20am GMT

It's almost time for UK retail sales data, which will give the latest insight into consumer willingness to spend as Brexit nears.

City economists are expecting the Office for National Statistics to say sales rose 0.2% in January, following a 0.9% fall in December.

8.52am GMT

The pound has dipped below the $1.28 after Theresa May's latest Brexit defeat in the Commons on Thursday.

Sterling is down 0.2% at $1.2792 after the vote cast fresh doubt that the PM has the power to win parliament's support for an amended EU withdrawal agreement.

Related: Theresa May defeated on Brexit again as ERG Tories abstain

8.35am GMT

Neil Wilson, chief market analyst at Markets.com, puts the RBS numbers into context:

RBS delivered a stellar set of numbers and a forecast-beating dividend payout to investors, but Brexit and other factors mean it will fall short on its cost cutting target.

On the whole this was just what investors have been waiting for. Profits rose to 1.6bn, ahead of the consensus for around 1.4bn and more than double the 752m a year ago.

8.22am GMT

Royal Bank of Scotland has kicked off the UK banks' reporting season this morning with better than expected results.

Profits more than doubled in 2018, to 1.6bn from just 752m a year earlier.

Related: RBS profits more than double to 1.6bn

8.13am GMT

The mood across European markets is distinctly subdued this morning:

7.58am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Donald Trump's readiness to declare a national emergency in order to build his border wall with Mexico has been weighing on on investor minds overnight.

#Australia200: 6059,8; -0,21%. #Nikkei: 20.892; -1,17%. #HangSeng: 27.867,50; -1,99%. #ChinaA50: 11.562,03; -2,41%. #Shanghai: 2.682,39; -1,37%. #Kospi: 2.196,09; -1,34% pic.twitter.com/gyxY29cx5Y

Asian markets followed Wall Street lower as traders digested dire US retail sales figures and reports that President Trump will declare a national emergency to get his Wall with Mexico funded. This overshadowed any optimism over US - China trade talks, although that too was starting to wear a little thin.