Next Share News (NXT)

LONDON (Alliance News) - London stock prices closed significantly higher Thursday, following a sharp rebound by Chinese stock markets and amid hopes that Greece will move closer to a debt bailout agreement with its creditors.

The FTSE 100 index of blue-chip stocks closed up 1.4% at 6,581.62 points, the FTSE 250 ended up 1.1% at 17,296.00, and the AIM All-Share index edged up 0.1% at 744.77.

European stocks outperformed London, with the CAC 40 in Paris closing up 2.6% and the DAX 30 in Frankfurt ending up 2.3%.

At the London close, Wall Street also was pushing higher, the with Dow Jones Industrial Average up 1.0%, the S&P 500 up 0.9%, and the Nasdaq Composite up 1.1%.

Traders and investors appeared to be upbeat about the potential for a deal between Greece and its creditors after the country promised to implement pension and tax reforms to win fresh aid. Greek Prime Minister Alexis Tsipras told the European Parliament on Wednesday that he would submit a detailed reform plan to the eurozone on Thursday aimed at resolving the country's debt crisis.

Athens has been asked to submit those proposals by 2300 BST on Thursday, so that enough time is left for preparatory work ahead of emergency talks by eurozone and EU leaders on Sunday afternoon.

EU President Donald Tusk called on Greece to submit "concrete and realistic" reform proposals to its creditors.

"I hope that today we will receive concrete and realistic proposals of reforms from Athens," Tusk said on Thursday after speaking with Tsipras.

Furthermore, the International Monetary Fund said it sees solid growth continuing in the eurozone even as Greece falls deeper into crisis. The IMF, which suspended bailout loans to Greece after Athens missed a EUR1.5 billion payment on June 30, says that recent events have not produced "any significant contagion", though "some risks of a re-emergence of financial stress remain".

The gains in London also were attributed to the bounce-back in stock prices in Asia, where the Hang Seng index in Hong Kong closed up 3.7% and the Shanghai Composite ended up 5.8%, its largest single-day percentage gain since March 2009, after dropping more than 3% at the opening bell. The gains were made after Chinese authorities unveiled fresh support measures, and official data showed China's consumer inflation ticked slightly higher in June.

China's securities regulator banned senior management and investors who own stakes in businesses exceeding 5% from selling their shares for next six months.

In addition, China's central bank said it would provide sufficient liquidity to China Securities Finance Corp, the state-backed margin finance company, via various channels. The China Banking Regulatory Commission said it would encourage banks to support companies' share buybacks by offering them collateralised loans.

"It was really just a sense of relief driving markets on Thursday, relief that the implosion of Chinese stock markets has, if not been prevented, at least been put off for another day," said Jasper Lawler, market analyst at CMC Markets.

"The sad reality is that after all these interventions, Chinese markets are more government-dependent than ever. Despite the panic that set in over the past five days, there is now an understanding that Chinese authorities will do 'whatever it takes' to prop up stock prices. Nobody in China, including investors want to fight the Chinese government," Lawler added.

The measures come in place after consistent sharp declines in the Chinese stock market, which has seen the Shanghai Composite index shed over 32% of its value since hitting its highest level in seven and a half years in the middle of June ahead of Thursday's session.

On the corporate front, Associated British Foods closed as the biggest gainer in the FTSE 100, up 5.2%. The company said its results for the full year will be harder hit than expected by the weak euro, as revenue in the first 40 weeks was flat at actual rates amid continued tough trading in its sugar business, which offset a still-buoyant performance by discount fashion retailer Primark.

The group, which owns Primark and British Sugar and which operates an agriculture and consumer goods arm, said group revenue for the 40 weeks to June 20 was flat year-on-year at actual currency rates and up by 2% in constant currencies, as the weakness of a euro against a wide basket of currencies hit its results.

Blue-chip housebuilders were amongst the top gainers, after Barratt Developments said it expects to post a 45% rise in annual profit for the year to the end of June as it sold more houses at higher prices over the period, sending its shares higher after they had fallen on Wednesday on the back of buy-to-let tax changes in the UK government Budget.

Barratt said it expects pretax profit for the year to the end of June to rise by 45% to GBP565 million from GBP390.6 million, and it expects its return on capital employed to improve by 430 basis points to 23.8% from 19.5%. The pretax profit guidance is ahead of market expectations, with Morningstar reporting consensus estimates of GBP555 million.

Barratt closed up 3.9%, while Taylor Wimpey rose 4.9% and Persimmon up 4.2%. The housebuilders' shares had dropped on Wednesday after UK Chancellor George Osborne said the government will restrict tax relief for buy-to-let landlords to the basic rate of tax.

On Thursday, Barratt Chief Executive David Thomas told Reuters that just 10% of the homes the company sold in 2015 were to to buy-to-let landlords, with most bought for cash or through a company. He said the number of transactions that would be impacted by the changes would be much lower than that 10%, as a result, and said that the market reaction to the Budget was "very overdone".

Next was the biggest of the few fallers in the FTSE 100, closing down 1.7% after going ex-dividend, meaning new buyers no longer qualify for the latest dividend payout.

In the FTSE 250, Drax Group ended as the best performer, up 7.3% rebounding from its 28% sell-off on Wednesday due to the UK government's decision in the Summer Budget to remove the exemption that generators of renewable electricity have had from the climate change levy. The biomass power plant operator's shares also were raised to Hold from Sell by S&P Capital IQ.

SuperGroup rose 7.2% after it said its pretax profit rose in its 2015 financial year on the back of robust retail sales over the course of the year and said it has signed a joint venture agreement to enter the Chinese market, as sales in the first quarter rose sharply against weak comparables.

The Superdry brand owner said its pretax profit for the year to April 25 was GBP59.5 million, up from GBP45.2 million last year, when the group was hit by GBP16.8 million in exceptional charges, and beating RBC Capital Markets' forecast of GBP54 million.

Total revenue increased 12.9% to GBP486.6 million from GBP430.9 million, with retail revenue in the year rising 17%, and like-for-like sales growth in the period up 4.8%. Within the retail sales segment, the contribution from online sales increased to 18.2%. Wholesale revenue for the company was up by 4.9%.

Balfour Beatty, however, closed down 3.7%. The support services and construction group said it expects an additional hit to its pretax profit in 2015 due to legacy issues in its UK, US and Middle East businesses. Balfour said the ongoing review of its business to identify legacy issues will result in a further GBP120 million to GBP150 million hit to its pretax profit for 2015, with around two-thirds of this coming from its UK business.

In the economic calendar Friday, there are trade balance data from the UK at 0930 BST and US wholesale inventories at 1500 BST. US Federal Reserve Chair Janet Yellen will be speaking in Cleveland, Ohio at 1700 BST.

In a quiet UK corporate calendar, there are full-year results from solid state battery technology company Ilika and Artemis Alpha Trust.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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