London midday: Stocks maintain gains amid retailer update bonanza

Thu 09 Jan 2020

LONDON (SHARECAST) - (Sharecast News) - London stocks were still in the green by midday on Thursday amid easing geopolitical tensions, with all eyes on the retail sector after updates from the likes of Marks & Spencer and Tesco.
The FTSE 100 was up 0.5% at 7,614.36, while the pound was down 0.6% against the dollar at 1.3021 - its lowest level since 27 December - and 0.5% lower versus the euro at 1.1724 after outgoing Bank of England governor Mark Carney struck a dovish tone in a speech at an event on inflation targeting, suggesting that the central bank could cut interest rates soon.

Carney cautioned that the rebound projected in the BoE's forecasts for this year was not assured and noted that the economy has been "sluggish". He said the pace of UK growth "has slowed below potential" due to the weaker external backdrop and a persistent drag from entrenched Brexit uncertainties.

"With the relatively limited space to cut Bank Rate, if evidence builds that the weakness in activity could persist, risk management considerations would favour a relatively prompt response," he said.

More broadly, sentiment was underpinned by cooling tensions between the US and Iran.

London Capital Group analyst Jasper Lawler said: "A ceasefire between the US and Iran has seen a relief rally take hold across global markets. All investors needed to hear was the US President say it appears Iran is 'standing down'. After that we were off to the races with fresh record highs for the S&P 500 and the Nasdaq.

"There are probably two truths here. One is that tension between Iran and the US does not end here and could easily escalate again. Already, two unexplained rocket attacks in Baghdad and threats of more revenge against the US from Iran are examples of how things can quickly get out of hand. Two is that markets have heard what they needed to hear and are ready to refocus on the signing of the US-China phase one deal.

"The deal is supposed to be signed next week and investors are hoping it removes the biggest source of uncertainty over the economic outlook, paving the way for more investment returns this year."

On the corporate front, it was a veritable retail bonanza, with updates from Tesco, Marks & Spencer, John Lewis, Card Factory and Dunelm.

Tesco was on the front foot after it reported a 0.1% rise in underlying UK Christmas sales in what it described as a "subdued" market. The UK's largest retailer said it had its biggest day of UK food sales in its history on the back of its "best operational performance in six years".

Marks & Spencer was a heavy faller, however, after the FTSE 250 the retailer reported a 0.6% decline in total third-quarter sales to 2.8bn as its clothing and home segment underperformed. In addition, while the company backed its guidance for the year, it said gross margins were expected to be around the lower end of guidance. M&S joint venture partner Ocado also lost ground.

Card Factory shares tumbled as it issued a profit warning after "challenging" Christmas trading. The company said FY20 adjusted underlying earnings before interest, tax, depreciation and amortisation are expected to be come in at between 81m and 83m, down from 89.4m last year.

Dunelm ticked a touch higher after the homeware retailer reported a 5% increase in total LFL sales for the second quarter.

Unlisted, employee-owned John Lewis was also in focus as it issued a profit warning, said the staff bonus was at risk and announced the departure of managing director Paula Nickolds.

The retailer updates came as the latest data from the British Retail Consortium and KPMG showed that the UK high street endured its worst year on record in 2019 as political turmoil weighed on consumer confidence and dented festive demand.

Elsewhere, Galliford Try was a high riser after an upbeat trading update, while shares of pub group Mitchells & Butlers fizzed higher after it said like for like sales grew 2.6% in the 14 weeks to January 4 with a strong performance over the Christmas period.

Building materials group SIG tumbled as it issued a profit warning due to deteriorating construction markets, namely in the UK. Travis Perkins was also in the red, while on the FTSE 100, B&Q owner Kingfisher declined, with traders pointed to read-across form the SIG warning.

Market Movers

FTSE 100 (UKX) 7,614.36 0.52%
FTSE 250 (MCX) 21,644.83 -0.03%
techMARK (TASX) 4,209.91 0.59%

FTSE 100 - Risers

NMC Health (NMC) 1,328.00p 5.61%
Evraz (EVR) 396.10p 2.86%
Vodafone Group (VOD) 151.46p 2.68%
London Stock Exchange Group (LSE) 7,710.00p 2.23%
Scottish Mortgage Inv Trust (SMT) 602.50p 2.12%
TUI AG Reg Shs (DI) (TUI) 946.20p 2.03%
Tesco (TSCO) 255.80p 1.91%
Burberry Group (BRBY) 2,216.00p 1.84%
Auto Trader Group (AUTO) 567.80p 1.72%
Ferguson (FERG) 7,088.00p 1.55%

FTSE 100 - Fallers

Kingfisher (KGF) 218.90p -2.28%
Ocado Group (OCDO) 1,312.00p -1.65%
Hargreaves Lansdown (HL.) 1,886.00p -1.33%
Next (NXT) 6,838.00p -0.98%
British Land Company (BLND) 597.40p -0.90%
Lloyds Banking Group (LLOY) 62.25p -0.86%
Associated British Foods (ABF) 2,640.00p -0.83%
Polymetal International (POLY) 1,193.50p -0.71%
United Utilities Group (UU.) 938.20p -0.70%
JD Sports Fashion (JD.) 813.40p -0.68%

FTSE 250 - Risers

Galliford Try (GFRD) 155.02p 7.59%
Future (FUTR) 1,444.00p 3.14%
PureTech Health (PRTC) 301.00p 2.73%
Mitchells & Butlers (MAB) 432.50p 2.61%
Kaz Minerals (KAZ) 546.00p 2.25%
Centamin (DI) (CEY) 124.25p 2.22%
Balfour Beatty (BBY) 260.00p 1.96%
Hilton Food Group (HFG) 1,072.00p 1.90%
Kainos Group (KNOS) 756.00p 1.89%
Dechra Pharmaceuticals (DPH) 3,066.00p 1.86%

FTSE 250 - Fallers

SIG (SHI) 94.00p -21.14%
Marks & Spencer Group (MKS) 198.45p -9.22%
Barr (A.G.) (BAG) 518.00p -8.64%
Ferrexpo (FXPO) 150.25p -3.87%
Brewin Dolphin Holdings (BRW) 357.00p -3.77%
Tullow Oil (TLW) 55.66p -3.57%
Paragon Banking Group (PAG) 508.00p -3.51%
Fresnillo (FRES) 622.60p -3.02%
Hochschild Mining (HOC) 160.20p -2.91%
Travis Perkins (TPK) 1,586.00p -2.76%
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