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LONDON (Alliance News) - Stocks in London were mostly higher Wednesday morning, with fashion retailer Next and lender HSBC Holdings leading gainers in the FTSE 100, ahead of the UK services PMI reading at 0930 BST.
The blue-chip index was up 0.4%, or 21.96 points, at 6,667.36. The FTSE 250 was down 0.1% at 17,042.65 and the AIM All-Share was up 0.1% at 758.68.
Shares in Next were up 3.7% shortly after the open. The clothing and homeware retailer reported growth in sales in the first half of its financial year but narrowed its full-year profit and sales guidance in what it called an "extremely volatile" market. Next said total sales in the 26 weeks ended July 30 rose by 1.8% year-on-year, as 5.4% growth in Next Directory offset a 0.7% decline in Next Retail.
As a result of the volatile market, Next narrowed its guidance for full-year pretax profit to between GBP775 million and GBP845 million from its previous guidance of between GBP748 million and GBP852 million. It also narrowed its full-price sales guidance for the full year to between a 2.5% decline and 2.5% growth from between a 3.5% decline and 3.5% growth.
HSBC shares also were adding 3.7%. The Asia-focused bank scrapped its return on tangible equity target deadline amid challenging economic conditions and continued low interest rates, while the lender's second-quarter profit missed expectations and it launched a USD2.50 billion share buyback.
HSBC Chairman Douglas Flint said the bank's board had decided that "in light of the current uncertain economic and geo-political environment", coupled with HSBC's view that interest rates will remain low for a long time, it has removed its target of reaching a return on tangible equity in excess of 10% by the end of 2017.
Flint said that while the overall target remains intact and appropriate, the current guidance to reach this level by the end of 2017 "is no longer considered achievable". HSBC said pretax profit for the half-year to the end of June was USD9.71 billion, down from USD13.63 billion a year earlier.
Meanwhile, miner Rio Tinto cut its interim dividend as its reported a steep drop in underlying earnings in the first half of 2016, but the company reported a large rise in net earnings in the half and committed to its previous guidance concerning the dividend for the year. The stock was up 0.3%.
Rio also said production and shipments of iron ore from the Pilbara operation in Australia were both considerably higher in the first half of the year, as was production of a number of other commodities. The multi-commodity miner reiterated its production guidance for the full year 2016 across all of its divisions, apart from thermal coal which was increased.
In the FTSE 250, shares in Aggreko were down 11% after the mobile electricity generation provider said continued challenging conditions in the market for temporary power resulted in profit and revenue dropping in the first half of 2016.
Still ahead in the UK corporate calendar, lender Standard Chartered will publish half-year results at 1000 BST.
The UK services PMI is expected to remain at the 47.4 reading seen in the flash reading of July 22, according to FXStreet.com.
"With the manufacturing estimate revised down from its 'flash' in Monday's release, the risks look more skewed to a downward adjustment for the services PMI, despite improved market sentiment and a semblance of political stability," said Lloyds Bank economist Michael Sawicki.
On Monday, the UK manufacturing sector reading was disappointing, coming in at 48.2 in July, below the flash estimate reading of 49.1, also released on July 22. A reading below 50.0 reflects contraction in the sector. On Tuesday, Markit's UK construction PMI dropped to 45.9 in July from 46.0 in June. However, it had been forecast to fall as far as to 43.8.
The services reading is the last of a set of UK PMIs released by Markit this week before the Bank of England monetary policy decision on Thursday, with investors widely expecting the central bank to announce a package of easing measures.
Elsewhere in the economic calendar Wednesday, there are Markit services PMI readings for France, Germany and the eurozone at 0850 BST, 0855 BST and 0900 BST, respectively. The same for the US is at 1445 BST, after US mortgage applications at 1200 BST.
In mainland Europe, the CAC 40 index in Paris is up 0.2% and the DAX 30 in Frankfurt is adding 0.1%.
In Asia, the Nikkei 225 in Tokyo closed down 1.9%. In China, the Shanghai Composite added 0.2%, while the Hang Seng index in Hong Kong continues down 1.6%.
By Daniel Ruiz; danielruiz@alliancenews.com
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