Next Share News (NXT)

LONDON (Alliance News) - The FTSE 100 snapped a run of four sessions in the red Tuesday, helped by an upbeat Christmas trading update from Wm Morrison Supermarkets, which boosted London-listed grocers, however gains were stemmed by a late fall in oil prices.

The FTSE 100 closed up 1.0% at 5,929.24, only its second day of gains since the turn of the year. The FTSE 250 closed up 0.2% at 16,687.91 and the AIM All-Share ended up 0.1% at 720.87.

In Europe, the French CAC 40 closed up 1.5% and the German DAX 30 ended up 1.6%.

Wall Street was mixed at the London close. The DJIA was down 0.1% while the S&P 500 traded up 0.1% and the Nasdaq Composite up 0.5%.

Oil prices were in again in focus, after Brent hit its lowest level in nearly 12 years before the London market opened at USD30.41 but rebounded after markets opened. The higher oil price helped drive the equity market rally, as Brent reached a high of USD32.35 a barrel. However, as the London close approached oil gave up its gains, and was quoted at USD30.67 a barrel at the end of trade.

Oil major Royal Dutch Shell 'A', down 0.5%, ended as one of the few fallers in the FTSE 100, while mid-cap Tullow Oil, down 7.2% and Ophir Energy, down 4.7%, were amongst the worst performers in the FTSE 250.

Gold, which has been relatively resilient in the recent downturn in stocks and commodities, traded lower Wednesday. At the London close, the commodity was quoted at USD1,088.30 an ounce, compared to Monday's close of USD1,098.88.

"The price of gold is dropping as fast as it rose last week as relative calm in equity markets reduces safe-haven demand. If demand for gold doesn't reappear before USD1070 per oz, around the July 2015 low, then there's an increased risk of fresh five-year lows," said Jasper Lawler, market analyst at CMC Markets.

Tesco was one of the biggest gainers in the FTSE 100, up 6.5%, joined by J Sainsbury, up 2.9%, while FTSE 250-listed Morrisons closed up 12%.

A better-than-expected Christmas trading update from Morrisons supported the shares of its blue-chip peers due to optimism that they too can beat expectations when they provide updates in the next two days.

Morrisons broke its trend of negative like-for-like sales when it reported its first growth in sales in four years, sending shares in the company surging higher.

The grocer said like-for-like sales in its key Christmas trading period in the nine weeks to January 3 grew 0.2% excluding fuel, significantly outpacing the consensus estimate for a 2.0% drop, although they fell 0.6% including fuel. Total sales, meanwhile, declined 1.2% excluding fuel and fell 1.7% including fuel, which Morrisons said was due to the shop closures it has made under its property disposal programme.

Morrisons said it continued to cut prices in the period while running fewer multi-save promotions, which boosted like-for-likes in premium products and in beer, wine and spirits, although this did have a knock-on effect on the number of items per basket.

The company has been undergoing a massive restructuring project against the backdrop of a UK market which has seen the Big Four supermarkets forced to invest heavily in price cuts as they face increased competition from discount grocers such as Aldi and Lidl. This has led to continued declines in sales in an increasingly deflationary food market.

Analysts were positive on Morrisons' update, with Societe Generale calling it a "positive surprise", although Cantor Fitzgerald said the supermarket chain could be bolder in its strategy by selling its manufacturing assets.

Supermarket shares also were boosted by the results of the latest Kantar Worldpanel UK grocery market survey. Sainsbury's emerged as the only winner among the Big Four from the Kantar survey, posting a 0.8% rise in sales in the 12 weeks to January 3. Tesco's sales fell 2.7%, while Morrisons' declined 2.6%.

Debenhams ended as the best performer in the FTSE 250, up 15% after the department store operator defied the trend of struggling clothing retailers by becoming the first of its London-listed peers to post better-than-expected sales results over the key Christmas period.

The company said group like-for-like sales in the 19 weeks to January 9 grew 1.9% on the same period the year before, rising 1.8% in the seven weeks to the same date. Debenhams said it made further progress on its strategic priorities which helped it to deliver a strong trading performance and record sales in the Christmas week.

The solid results were a surprise after a string of disappointing Christmas updates from clothing retailers over the past week including two of Debenhams' rivals; Next and Marks & Spencer Group.

Bakery and food-to-go retailer Greggs closed as the worst performer in the FTSE 250, down 13% despite reporting growth in sales in its recently-ended financial year, driven by sandwiches, drinks, hot food and coffee, although like-for-like sales growth slowed over the Christmas period against a strong comparative period and amid weaker footfall.

Michael Page International was also amongst the biggest fallers in the mid-cap index, down 5.9%. The recruiter said its gross profit dipped in the fourth quarter due to currency weakness across its operations and tougher trading in Asia Pacific.

Michael Page said its total gross profit fell 0.5% in the fourth quarter to the end of December, though it would have increased 5.3% in constant currencies. The biggest currency hits came in its Europe, Middle East and Africa arm, where reported gross profit growth was 1.6% compared to 10% in constant currencies, hit by a weak euro, and in the Americas region, where gross profit fell 4.1% but rose 5.4% in constant currencies.

Market conditions also weakened in the UK and Asia Pacific, the group said. The news also dragged shares in recruitment rival Hays down 6.7%.

The pound fell to multi year lows against the dollar after disappointing industrial production data, released by the Office for National Statistics.

Industrial output slid 0.7% month-on-month after staying flat in October. It was forecast to grow 0.1% in November. This was the biggest fall since early 2013 as energy production plunged 1.8% and mining and quarrying output decreased 1.6%.

On a yearly basis, industrial production advanced 0.9%, but this was slower than the consensus expectation of a 1.7% increase, which would have matched the growth seen in October.

Manufacturing output dropped 0.4% month-on-month, confounding expectations for a 0.1% rise. Annually, manufacturing output declined at the quickened pace of 1.2%, following a 0.2% drop a month ago. Economists had forecast a 0.8% decline for November.

Kallum Pickering, senior UK economist at Berenberg, said 2016 is likely to be another tough year for UK manufacturing.

"Stagnant productivity, strong sterling and weak foreign demand are likely to hold down export-oriented industries for at least another year. As a result, manufacturing will at best see marginal growth in 2016 with risks to the downside if the [Bank of England's] rate hikes further strengthen sterling and/or if our optimism proves correct that the risk of a Brexit will begin to fall," Pickering said.

The pound sunk against other major indices after the industrial production report and hit its lowest level against the dollar since June 2010 at USD1.4350. At the London close it traded at USD1.4395. Against the euro, sterling fell to a low of EUR1.3246.

The euro traded the dollar at USD1.0837 at the European equity close compared to USD1.0885 on Monday.

In the economic calendar for Wednesday, Chinese import, export and trade balance data are out at 0200 GMT. French inflation figures are at 0745 GMT before eurozone industrial production at 1000 GMT. US MBA mortgage applications are at 1200 GMT, the Energy Information Administration's crude oil stocks are at 1530 GMT and the US monthly budget statement is after the London close at 1900 GMT.

In another busy day for the UK corporate calendar, there are trading statements from Sainsbury's, housebuilder Barratt Developments, fashion retailer Ted Baker, Hays, Tullow Oil, homewares retailer Dunelm Group, engineer Fenner and specialist distributor Connect Group amongst others. Footwear retailer Shoe Zone reports half-year results.

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

Copyright 2016 Alliance News Limited. All Rights Reserved.