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LONDON (Alliance News) - UK stocks closed higher Friday after a sequence of stronger-than-expected UK data releases overcame early lethargy and strong Christmas sales figures posted by retailer Next PLC pushed the UK's headline index higher.
UK stocks opened mixed Friday, with large- and mid-caps fractionally lower as yet another disappointing report coming out of China added to concerns about the state of the world's second largest economy.
In the latest survey, Chinese non-manufacturing business activity was seen to fall to 54.6 in December, down sharply from 56.0 in November.
The data follows on from the report earlier in the week that China's manufacturing activity declined in December. A survey by Markit Economics and HSBC on Thursday revealed that the headline purchasing managers' index fell to a three-month low of 50.5 in December from 50.8 in November. On Wednesday, the China Federation of Logistics and Purchasing and the National Bureau of Statistics revealed that the purchasing managers' index fell to 51 in December from 51.4 in November.
In the aftermath of a raft of UK data releases, however, UK equities rallied.
Sentiment was buoyed after the UK construction PMI beat consensus forecasts Friday. Although the UK's construction sector growth was shown to moderate in December, as new order inflows eased, the fall was more modest than had been expected. The seasonally-adjusted purchasing managers' index fell to 62.1 in December from November's 75-month peak of 62.6, beating expectations of a drop to 62.
Despite the dip, the December reading suggested solid improvement in operating conditions at construction firms. Moreover, the latest outcome marked eight months of continuous output growth.
Alongside this, Nationwide revealed that UK house price growth accelerated by more than expected at the end of 2013. House prices increased 8.4% year-on-year in December, after gaining 6.5% in November, to record the biggest annual growth since June 2010, beating expectations of a rise 7.1%.
Month-on-month, house price growth doubled to 1.4% from 0.7%, notching the fastest increase since 2009. Economists had expected a monthly rise of 0.7%.
Further, mortgages granted for house purchases reached an almost a six-year high in November. The Bank of England revealed that UK mortgage approvals increased for the ninth consecutive month in November. The number of loans approved for house purchases was 70,758 in November, up from 68,029 in October, and exceeding the 69,000 level forecast by economists.
IHS Global Insight's Chief UK Economist Howard Archer noted that the December jump in house prices reported by the Nationwide, coupled with mortgage approvals climbing to a 70-month high in November, would fuel concern that a new housing bubble could really develop in 2014.
However, this sentiment was not reflected by UK equity markets, which moved higher in aftermath the release, said Alex Conroy, financial trader at Spreadex.
The FTSE 100 closed up 0.2% at 6,730.67 as it celebrated its thirtieth anniversary. The FTSE 250 closed up 0.6% at 16,020.47, and the AIM All-Share index closed up 0.8% at 865.6.
A bullish statement from retailer Next helped to nudge the UK's headline index higher.
The homeware and clothing retailer, closed up 10%, after it said that sales in the fourth quarter have been significantly ahead of expectations, boosted by online sales and strong trading in the run-up to Christmas and in its end-of-season sale. As a result, Next now expects a pretax profit of between GBP684 million and GBP700 million in the year to January 25, and it declared a special dividend of 50 pence per share.
The retailer had raised its upper-end pretax profit expectations as recently as October, to its previous guidance of up to GBP680 million.
The report also pushed other retail stocks higher, with Marks & Spencer closing up 3.9%. Overall, the general retailers FTSE 350 sector index closed up 4%.
Schroders, closing up 1.3%, was another big blue-chip winner. Barclays upgraded the company to Overweight from Underweight, lifting its price target to 3,010.00p from 2,150.00p. Barclays believes that the headwind experienced when Schroders' previous Head of UK Equities and Manager of the UK Alpha Fund Richard Buxton announced his departure in March 2013, is now receding.
Barclays also likes the company's attractive product range, noting that 68% of the group's assets under management benchmarks have outperformed over the last three years.
Still to come Friday, Federal Reserve Chairman Ben Bernanke is scheduled to give a speech at 1930 GMT. The significance of this is debated. Conroy is confident that, "The speech is likely to trigger volatility in the markets as investors gain a better understanding of the state of the economy which could see investors piling back into equities."
Forex.com's research director, Kathleen Brooks, is less convinced. "The conference is not an obvious forum for policy revelations and we think it will be a mere amuse-bouche before next week?s all important Fed minutes," she said.
In the data calendar Monday, there is a raft of services PMI figures released by Markit Economics. China's services PMI is released at 0145 GMT, with Spain's expected at 0813 GMT, Italy's at 0843 GMT, France's at 0848 GMT, Germany's is scheduled for 0853 GMT, ahead of the eurozone's number at 0858 GMT and the UK's at 0928 GMT. German consumer price index information is released at 1300 GMT.
In the US, factory orders data and the the ISM non-manufacturing index are released at 1500 GMT.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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