Barclays Share News (BARC)

LONDON (Alliance News) - UK stocks made broad gains Wednesday, buoyed by the expectation that the US Federal Reserve will maintain a dovish tone in its latest policy statement, which is due to be published shortly after the European market close.

Clothing retailers underperformed the London market after Next followed through with a previous warning and lowered its full-year earnings forecast due to unseasonably warm UK weather keeping shoppers away.

"The upcoming Fed meeting overshadowed a bigger than expected slowdown in mortgage approvals in the UK and profit warning from Next," said Jasper Lawler, market analyst at CMC Markets.

The FTSE 100 closed up 0.8% at a three week high of 6,453.87, the FTSE 250 closed up 0.7% at 15,234.14, and the AIM All-Share closed up 0.4% at 715.19.

The price of oil rose Thursday. Benchmark Brent Crude reached a two week high of USD87.91, supported by in the afternoon by US inventories data showing that stocks are being drawn down at a lower rate than expected. Oil and gas stocks were amongst the best performers in the London market, with the FTSE 350 Oil and Gas Producers index up 1.8%.

Major European markets lagged the UK, with the French CAC 40 ending fractionally lower, and the German DAX fractionally higher. Following the European close, US stocks are relatively subdued in the run up to the 1800 GMT Fed decision. The DJIA and the S&P 500 are both just fractionally lower, while the Nasdaq Composite is down 0.6%. The technology heavy market is being led lower by a sharp fall in Facebook shares, which are down more than 6% after it beat third quarter estimates but Chief Executive Mark Zuckerberg warned of a tougher fourth quarter.

The only significant data release of the day was UK mortgage approvals, which recorded a bigger fall than expected in September. The number of mortgages approved for house purchases decreased to 61,267 in September from 64,054 in August. This was the lowest level since July 2013 and worse than the fall to 62,000 that had been forecast.

The markets appeared to overlook the disappointing data, however, focusing instead on the upcoming Fed meeting.

The US central bank has steadily tapered its asset buying programme by USD10 billion at each recent meeting and most analysts expect a final taper of USD15 billion at Thursday's meeting, bringing its quantitative easing programme to an end.

There is no press conference following the announcement this month, leaving the focus on the exact wording of the policy statement. Investors will be focused on any hints as to when the first US interest rate rise might happen, as well as any clues over whether QE remains a policy tool for potential future use if the economy fails to properly recover.

Clothing retailers underperformed in London after Next lowered its full-year earnings forecasts, blaming lower sales as warm autumn weather meant consumers delayed purchases of winter clothes. The UK fashion retailer now expects sales growth of 6% to 8% for the year to January 2015, down from its previous growth forecast of between 7% and 10%, and cut its full-year pretax profit estimate to between GBP750 million and GBP790 million, representing annual growth of between 8% and 14%.

The company had warned in September that unseasonably warm weather might affect sales of new clothes as winter approached, reporting sales of 6% at that point in the quarter compared with its forecast for more than 10%.

Next ended the day down 1.3%, and the warning hit the sector as a whole as analysts warned that other clothing retailers will likely be similarly hit. Marks & Spencer Group fell 0.6%, while FTSE 250-listed SuperGroup fell 3.6% and Debenhams fell 0.5%.

Tesco shares, which have fallen sharply in recent weeks following a string of bad news for the retailer, ended up 1.5% Wednesday. That move came despite the Serious Fraud Office launching an investigation into accounting practices at the company in the wake of the recent overstatement. The Financial Conduct Authority has dropped its probe in light of the SFO getting involved. The average length of a single investigation at the SFO is between four to six years.

TUI Travel was one of the best blue chip performers, up 3.3% after its German parent company TUI AG released a positive update on Tuesday, saying that unlike in previous quarters, its earnings improvement was not only driven by cost reductions but for the first time by turnover growth. TUI Travel is in the process of being bought by the parent company, which will create the worlds largest tourism business.

Capita was the worst performing stock in the FTSE 100, down 6.5% after the Ministry of Justice overlooked it when naming the preferred bidders for 21 rehabilitation services contracts. Interserve was the only UK-listed company to win a place on the programme, and closed up 3.3% as a result. The announcement was also negative for Carillion and Staffline Group, which closed down 0.6% and 2.3%, respectively, as they were also in the running for contracts.

IP Group rose 4.9% after the intellectual property business said its chairman is to step down, but will stay in the position until a successor is appointed. Bruce Smith joined the board of IP Group in September 2002 and has served as non-executive chairman since it floated on the stock market in 2003.

The US economy will be in firm focus when the Fed announces its latest policy decision at 1800 GMT, and it will continue to be in focus on Thursday when the preliminary reading of third-quarter US GDP is released. The health of the European economy will also be back under the microscope, with German unemployment and inflation data due.

Barclays releases its third quarter interim management statement, along with St James Place, Aviva, and National Express Group. Royal Dutch Shell and Smith & Nephew release third quarter results, and BT Group puts out its half year results. Kazakhmys releases a production report.

By Jon Darby; jondarby@alliancenews.com; @jondarby100

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