LONDON MARKET MIDDAY: FTSE 100 rises as retailers rally on Next update

(Alliance News) - Impressive UK manufacturing data released on Thursday helped to brighten the FTSE 100's path, while share price gains for travel stocks and retailers also provided some support.

The FTSE 100 was up 33.48 points, or 0.5%, at 6,747.11 midday Thursday. The mid-cap FTSE 250 index was faring even better, up 194.60 points, or 0.9%, to 21,713.31. The AIM All-Share index was up 0.7% at 1,206.22.

The Cboe UK 100 index was up 0.2% at 672.54. The Cboe 250 was up 0.7% at 19,398.73, and the Cboe Small Companies up 0.3% at 13,921.97.

Markets in Europe got a boost after some stellar manufacturing figures.

UK manufacturing activity hit its best level in over a decade in March, IHS Markit showed, while the eurozone notched a survey record.

The IHS Markit/Chartered Institute of Procurement & Supply UK purchasing managers' index shot up to 58.9 in March - the best reading since February 2011 - from 55.1 the month before. The figure beat the flash estimate of 57.9.

Any reading over the no-change mark of 50 signals sector growth, meaning UK manufacturing in March saw activity accelerate sharply.

Firms were upbeat over the year ahead, supported by a rebound in both domestic and global economic conditions. Business sentiment was at its most elevated for seven years, and nearly two-thirds of manufacturers expect output to rise over the coming year.

Despite the figures, the pound was soft at USD1.3774 versus USD1.3785 at the London equities close on Wednesday.

The eurozone, meanwhile, saw its manufacturing PMI surge to 62.5 points, beating the earlier flash estimate of 62.4. The March figure was up from February's tally of 57.9 points and well above the neutral mark of 50.0.

PMI figures for Germany and Netherlands came in at record highs. Italy and France posted their best tallies in more than 20 years.

The euro edged up to USD1.1748 from USD1.1742.

Equities in mainland Europe lagged London at midday, however. Stocks in Paris were weighed down by news of a fresh French lockdown, while Frankfurt's DAX 30, though only posting moderate gains, was trading at record levels.

The CAC 40 in Paris was up 0.3% at midday and the DAX 30 in Frankfurt gained 0.3% also, trading at 15,052.33 after hitting an all-time high of 15,104.14 earlier in Thursday's session.

Against the yen, the dollar was quoted at JPY110.81, up from JPY110.50.

Gold was quoted at USD1,715.27 an ounce on Thursday, higher than USD1,704.21 on Wednesday. Brent oil was trading at USD64.12 a barrel, nudging up from USD64.00 late Wednesday.

Still to come on Thursday are US initial jobless claims at 1330 BST and a manufacturing PMI reading at 1445 BST.

Ahead of the US data, Wall Street was on track for a positive open. The Dow Jones was pointed up 0.1%, the S&P 500 up 0.3% and the Nasdaq Composite up 0.9%.

In London, travel stocks traded in the green at midday.

"It seems investors are very much of the mind that it is still worth backing companies that will benefit from the reopening of the global economy, despite the negative backdrop of France closing schools in its third lockdown and Brazil still struggling to get Covid under control," said Russ Mould, investment director at AJ Bell.

International Consolidated Airlines, which owns British Airways, rose 4.3%, while easyJet gained 3.8% and Ryanair 3.2%. Cineworld, another reopening play, rose 4.1%.

"In backing these companies, investors are effectively looking past any short-term noise and potential setbacks to getting the pandemic under control, and instead looking well into the future and taking the view that earnings will not just start to recover in 2021 but also keep improving thereafter," said Mould.

Retailers were another group ahead after a sector-boosting update from Next.

Next shares rose 2.3% after raising its outlook, meeting annual profit guidance and "optimistically" ruling out any more store closures as the UK's vaccine rollout continues.

The clothing and homewares chain also took note of the "battle" its bricks and mortar arm faces as the retail sector's shift to online was accelerated by the Covid-19 pandemic. Next also decided against making a final payout but did say it will review its dividend once visibility improves.

Online was the star for Next during the Covid-19-hit financial year, keeping a lid on the FTSE 100 firm's revenue decline. In the year ended January 30, total revenue fell 17% to GBP3.53 billion from GBP4.27 billion. Full price sales were down 15%.

Pretax profit dropped 54% to GBP342.4 million from GBP748.5 million, though it did meet the latest guidance. Online sales rose 10% to GBP2.37 billion, while retail sales dropped 48% to GBP954.5 million.

On recent trading, Next said that online sales have been much stronger than expected in the first eight weeks of the new year, and are up more than 60% on two years ago. The company bumped up its profit guidance to take its central guidance for the year ahead to GBP700 million from GBP670 million.

Next's buoyant update lifted the share prices of retailing peers, with JD Sports rising 2.3%, Mike Ashley's Frasers Group up 2.8%, and Marks & Spencer up 1.2%.

Online fashion retailers rose, taking heart from Next's web strength, with ASOS up 2.6% and boohoo rising 2.2%.

Elsewhere in London, equipment rental firm Ashtead rose 2.4% on US President Joe Biden's bumper USD2 trillion infrastructure spending plans.

Biden on Wednesday unveiled the far-reaching plan to shore up the nation's highways, bridges and ports, as well as fund telecommunications upgrades plus research and development to boost competitiveness, especially compared to China.

A key source of the financing would come from increasing the corporate tax rate from 21% to 28%, and cracking down on the use of tax havens to avoid paying US taxes.

At the bottom of the blue-chips was Phoenix Group Holdings, down 2.8% after the stock went ex-dividend.

In the FTSE 250, Quilter shares bounced 4.0% after agreeing the sale of Quilter International to Utmost Group for GBP483 million.

Net cash proceeds of GBP450 million are expected from the sale after allowing for transaction costs. Quilter said it is currently minded to undertake a capital distribution to shareholders of the majority of the net cash proceeds.

Avon Rubber advanced 3.9%. It confirmed a modification to an existing US Army Integrated Head Protection System low-rate initial production contract to increase the value by an estimated USD28.4 million.

As part of the modification, the US Army has placed an order under this contract worth USD18.9 million, with deliveries expected to commence in Avon's current financial year.

By Lucy Heming; lucyheming@alliancenews.com

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