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LONDON MARKET CLOSE: Weaker Pound, Next Update Help Stocks End Higher

[ 03 Jan 2018 17:04 ]

LONDON (Alliance News) - Despite spending most of Wednesday struggling to post any gains, the FTSE 100 ended the session higher after the pound was hit by a weaker-than-expected construction PMI reading, and further dented as the latest US ISM manufacturing PMI beat expectations.

Also helping the blue-chip index rise were gains from retailers, as a positive Christmas trading update from Next set the tone for peers as they prepare to post festive sales figures in the weeks ahead.

The FTSE 100 index closed up 0.3%, or 23.01 points at 7,671.11 on Wednesday. The mid-cap FTSE 250 index closed up 0.3%, or 62.45 points, at 20,743.90. The AIM All-Share index closed up 1.2%, or 12.90 points, at 1,063.44, around its best level in ten years.

The BATS UK 100 index ended up 0.5% at 13,034.44. The BATS 250 closed up 0.4% at 18,882.10, and the BATS Small Companies up 0.7% at 12,818.73.

Sterling was quoted at USD1.3515 at the London equities close Wednesday, lower compared to USD1.3553 late Tuesday.

The pound tumbled from Wednesday's intraday high of USD1.3613 following a weaker-than-expected construction PMI reading, as well as a strong US manufacturing PMI which saw the dollar strengthen.

Reflecting strong expansions in new orders and production, the Institute for Supply Management on Wednesday showed growth in US manufacturing activity unexpectedly accelerated in December.

The ISM said its PMI rose to 59.7 in December from 58.2 in November, with a reading above 50 indicating growth in the manufacturing sector. Economists had expected the index to edge down to 58.1.

The unexpected increase by the headline index was partly due to a notable acceleration in the pace of new orders growth, as the new orders index jumped to 69.4 in December from 64.0 in November.

Additionally, the Commerce Department on Wednesday showed a bigger than expected increase in US construction spending in November. Construction spending climbed by 0.8% to an annual rate of USD1.257 trillion in November from a revised USD1.247 trillion in October, above expectations of a 0.5% rise.

Meanwhile in the UK, released Wednesday morning, the IHS Markit/Chartered Institute of Procurement & Supply construction PMI slipped to 52.2 in December from 53.1 in November, below forecasts for the figure to fall just slightly to 53.0.

Among sub sectors, house building remained a key engine of growth. In contrast, commercial construction fell moderately. At the same time, civil engineering work stabilized, ending a three-month period of decline.

The weak construction reading followed on from a lower-than-expected UK manufacturing PMI on Tuesday.

In mainland Europe, the CAC 40 in Paris closed up 0.8% while the DAX 30 in Frankfurt ended up 0.8% on Wednesday.

The euro was quoted at USD1.2024 at the European equities close Wednesday, soft compared to USD1.2046 at close on Tuesday.

Stocks in New York were continuing their strong start to 2018 at the London close. The DJIA was up 0.2%, the S&P 500 index up 0.4% and the the tech heavy Nasdaq Composite up 0.7%.

In focus later on Wednesday will be the minutes of the Federal Reserve's December policy-setting meeting, to be released at 1900 GMT.

"The dollar has come under renewed pressure over the last few weeks and only shorter term yields rose last year, despite the central bank raising interest rates three times and signalling three more in 2018. It will be interesting to see how worries some policy makers are becoming about the lack of inflation and what impact investors see this having on the rate path," said Oanda senior market analyst Craig Erlam.

Brent was quoted at USD67.44 a barrel at the London equities close, up compared to USD66.73 late Tuesday ahead of the API weekly crude oil stock at 2130 GMT and as tensions in Iran continue.

London-listed oil majors were tracking the price of oil higher, with Royal Dutch Shell 'A' shares ending up 1.5%, 'B' shares up 1.4%, and BP closing up 1.3%.

In other commodities, gold was quoted at USD1,315.94 an ounce at the London equities close Wednesday, firm compared to USD1,312.62 at the close on Tuesday but off its overnight high of USD1,321.24.

In London on Wednesday, retailers ended the day as the best performers after Next upgraded its guidance on the back of strong trading in the run up to Christmas.

The clothing and homewares retailer closed up 7.2% at 4,822.71 pence, having hit a two-month high of 4,947.00p earlier in the session, after increasing its central guidance for group pretax profit for the year ending in late January by GBP8.0 million to GBP725.0 million.

The profit guidance range is now between GBP718.0 million and GBP732.0 million. Its previous range, given at the start of November, was for pretax profit in a range of GBP692.0 million to GBP742.0 million.

Next - the first of the major retailers to release a Christmas trading update - said the guidance upgrade comes after better-than-expected full-price sales in the 54 days to December 24. Brand total full price sales were up 1.5% in the period, and were up 0.2% in the year-to-date. This 1.5% growth is an improvement on the minus 0.3% forecast given in November for the period.

Primark-owner Associated British Foods closed up 2.1%, clothing retailer Marks & Spencer up 1.4%, and luxury fashion house Burberry up 0.8%. M&S will release a trading update Thursday next week.

The FTSE 350 general retailers sector index closed up 1.9% on Wednesday, the best performing sector.

Midcap clothing retailers N Brown Group, SuperGroup, and Sports Direct International closed up 7.2%, 4.9% and 2.3%, respectively.

The read-across from Next's Christmas trading update "looks supportive" for N Brown's upcoming third-quarter results on January 23, analysts at Jefferies said.

Blue-chip grocer Wm Morrison Supermarkets ended up 2.0%, with Barclays expecting the firm to post 1.4% like-for-like growth for the 10 weeks to January 7.

"We expect UK consumers to have shrugged off wider gloom and spent on groceries at a relatively healthy level over Christmas. We also think that Morrison will likely do a good job setting itself up to trade well over Christmas as it has done in the last couple of years," said analysts at Barclays.

FTSE 100-listed credit checking firm Experian ended up 2.3% and equipment rental company Ashtead Group up by 2.1% after Credit Suisse raised the stocks to Outperform from Neutral.

Suffering from downgrades by Credit Suisse were midcap recruitment firms PageGroup and Hays, closing down 4.4% and 2.5% respectively. The broker cut PageGroup to Underperform from Neutral, and Hays to Neutral from Outperform.

On the Main Market, troubled support services firm Carillion ended down 5.4%, after news the UK Financial Conduct Authority has started an investigation into announcements made by the company.

Carillion said the FCA will look into "the timeliness and content" of announcements made between December 7, 2016 and July 10 last year. The support services firm said it is cooperating "fully" with the financial regulator.

The firm issued three profit warnings within the space of five months in 2017, its stock slumping 93% in the year as a result.

AIM-listed contract-for-difference provider Plus500 closed up 21% at 1,065.00p, having hit a record high of 1,104p earlier on Wednesday after saying it expects revenue and profit for 2017 to be ahead of market expectations.

The company reported record quarterly revenue in the final quarter of 2017 with 246,500 new customers joining during the year, more than doubling from 104,432 new customers the year before.

Plus500 said it has seen strong volumes in cryptocurrency contracts-for-difference along with increased interest throughout the year.

The economic calendar on Thursday has services PMI readings from China, Italy, France, Germany, and the eurozone at 0145 GMT, 0845 GMT, 0855 GMT and 0900 GMT respectively.

The services PMI reading is due from the UK at 0930 GMT, along with consumer credit and mortgage approvals data due at the same time, though before this the Nationwide housing price data is due at 0700 GMT.

In the afternoon attention turns to the US with initial jobless claims at 1330 GMT, services PMI at 1445 GMT, EIA natural gas storage change at 1530 GMT and crude oil stocks change at 1600 GMT.

The UK corporate calendar on Thursday there are trading statements from engineering services company Costain Group and from respiratory medicines maker Vectura Group. In addition, British Airways parent company International Consolidated Airlines Group reports traffic statistics for December at 1500 GMT.

By Lucy Heming;

Copyright 2018 Alliance News Limited. All Rights Reserved.

LONDON MARKET CLOSE: Weaker Pound, Next Update Help Stocks End Higher - Alliance News

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