LONDON MARKET OPEN: Stocks higher; Next rises after lifting guidance

(Alliance News) - Stock prices in London opened slightly higher on Thursday as investors gear up for the Bank of England's interest rate decision at midday, while Next shares were higher after raising annual guidance.

The FTSE 100 index was up 20.74 points, or 0.3%, at 7,060.04 early Thursday. The mid-cap FTSE 250 index was up 53.03 points, or 0.2%, at 22,438.93. The AIM All-Share index was down 0.2% at 1,258.31.

The Cboe UK 100 index was up 1.4% at 703.20. The Cboe 250 was up 0.2% at 20,106.81 and the Cboe Small Companies down 0.2% at 14,682.26.

In mainland Europe, the CAC 40 in Paris was up 0.3%, while the DAX 30 in Frankfurt was up 0.4%.

In the FTSE 100, Next was the best performer, up 2.2%, after the clothing and homewares retailer boosted its full-year profit guidance following a strong first quarter.

Next said full price sales were down 1.5% in the 13 weeks to May 1 on two years ago, before the Covid-19 pandemic, which the company said was a more "meaningful" comparison.

The FTSE 100 constituent said it had assumed full-price sales during period would be down 10%, but beat this forecast by GBP75 million. Next raised its central guidance for full-year pretax profit by GBP20 million to GBP720 million.

Next explained the profit upgrade accounts for the GBP75 million sales beat in the first quarter. It has not raised sales growth guidance for the rest of the year, which remains at 3% higher against two years ago.

Looking ahead, Next said it expects the recent post-lockdown sales surge to be short lived - based on the experience of last year - with sales to settle back toward guidance levels within the next few weeks.

"We hold Next on both our HL Select UK funds because it is the best placed UK retailer for the digital era. It was earning most of its money online long before anyone said 'pandemic'. Management have a long track record of making the right calls and building the business for the future, well in advance," said Steve Clayton, fund manager of the Hargreaves Lansdown Select UK Shares funds.

"They generate cash hand over fist and reinvest to drive growth in a way that rivals can only dream of. Dividends have been on pause for a few quarters, but their return has surely been accelerated by this trading performance," Clayton added.

Mexican precious metal miner Fresnillo was the second-best performer, up 2.0%, tracking spot gold prices higher, quoted at USD1,793.58 an ounce Thursday morning, up from USD1,781.79 late Wednesday.

Melrose Industries was up 2.0% after the industrial turnaround specialist said that, in the four months to April 30, trading was modestly ahead of expectations.

Melrose said the momentum seen in the second half of 2020 has continued into 2021, with sales in the period being 8% higher than in the same period in 2020. Excluding Nortek Air Management, group sales grew by 4%.

Further, Melrose said operating margins achieved in the first quarter of the year continued to improve faster than expected, and cash generation has been encouraging, with Melrose "being cash neutral in the first quarter, in what is traditionally a cash outflow period".

Looking ahead, Melrose expects the improvements in trading to continue, but noted the growth rate will be hindered by supply issues on semi-conductors in the global automotive supply chain.

National Grid was up 1.8% after Berenberg raised the UK power lines operator to Buy from Hold.

Barratt Developments was up 1.3%. The housebuilder said it has performed well since the start of the calendar year reflecting underlying market strength and strong customer demand for "high-quality sustainable new homes".

For the period from January 1 to this past Sunday, total forward sales were GBP3.7 billion, up 31% from GBP2.83 billion at the same time in 2020 and delivered 4,481 home completions, up 28% from 3,504.

The increase in completions in the period reflected the delivery of customers' homes in line with the UK government's original Help to Buy scheme and the stamp duty holiday deadlines, Barratt said.

At the other end of the large-caps, Admiral Group, Polymetal International and Croda International were the worst performers, down 3.5%, 3.0% and 2.9% respectively. The stocks went ex-dividend meaning new buyers no longer qualify for the latest payout.

The pound was quoted at USD1.3905 early Thursday, little changed from USD1.3910 at the London equities close Wednesday.

The Bank of England will announce its latest monetary policy decision, alongside the release of the Monetary Policy Committee meeting minutes and Monetary Policy Report, at midday on Thursday.

The central bank is set to leave its policy unchanged, but could potentially hint at tapering bond buys.

The euro was priced at USD1.2009, flat from USD1.2000 late Wednesday. Against the yen, the dollar was trading at JPY109.33, up from JPY109.26.

Brent oil was trading at USD69.11 a barrel, down from USD69.89 late Wednesday.

The Japanese Nikkei 225 index closed up 1.8%. In China, the Shanghai Composite ended down 0.2%, while the Hang Seng index in Hong Kong was up 0.3%. Markets in Tokyo and Shanghai reopened after being closed for holidays since last week. The S&P/ASX 200 in Sydney ended 0.6% lower.

The economic events calendar on Thursday has UK services PMI at 0930 BST, eurozone retail sales at 1000 BST and US jobless claims at 1330 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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