By This Is Money Reporters
17.30 (CLOSE): Strong Christmas trading updates lifted Argos owner Home Retail Group and Halfords but were unable to inspire the wider share market as it failed to build on the gains of the previous session.
A fresh round of festive trading bulletins provided mainly positive figures, with Home Retail Group additionally boosted by an upgrade to the City’s profit forecasts.
But elsewhere, investors were content to sit on recent gains to leave the FTSE 100 Index drifting 4.4 points lower to 6815.4.
Bump: Halfords shares rose by seven per cent after a 5.2 per cent rise in like-for-like sales.
There was little appetite for any advance on the strong advances across Europe in the previous session – with figures showing that eurozone inflation met expectations failing to spark excitement.
France’s Cac 40 and Germany’s Dax also slid into the red amid profit-taking while in New York the Dow Jones Industrial Average went into reverse too – amid disappointing earnings figures from US bank Citigroup.
Meanwhile, Goldman Sachs reported lower fourth quarter profits though the fall was not as bad as analysts had expected.
On currency markets, sterling was flat at 1.63 US dollars and 1.20 euros.
In London, Halfords set the pace in the FTSE 250 after the retailer reported a 5.2 per cent rise in like-for-like sales, driven by significant growth in its bicycle department. Shares responded with a gain of nearly 7 per cent, up 31.5p to 492.5p.
Home Retail Group was 3.1p higher to 204.1p, after Argos same-store sales rose 3.8 per cent and its Homebase DIY chain improved by 4.7 per cent.
It now expects profits to be towards the top end of the current range of market expectations of 90million to 109million.
Dixons Retail Group, which owns PC World and Currys, saw like-for-like sales rise 5 per cent in the UK and Ireland but margins were slightly lower. Shares were down more than 6 per cent, or 3.3p, to 47.1p.
Chief executive Sebastian James said it had been a ‘lively Christmas with plenty of ups and downs’ but added a note of caution by saying the recovery in the UK was still at a ‘fledgling’ stage.
Elsewhere, shares in bookmaker Ladbrokes were 3p higher to 176p amid relief that it expects profits for the year to meet City forecasts. The stock has fallen recently due to a run of football results and the threat of regulation on fixed odds gaming machines.
Miners led the way in the top-flight after Rio Tinto’s well-received fourth quarter results that saw record iron ore production and cost cutting ahead of target for the year.
It prompted analysts at Canaccord Genuity to predict a small upgrade to earnings predictions as the stock climbed 2 per cent, or 80.5p, to 3334.5p.
But it was fellow miner Antofagasta that topped the FTSE 100 risers’ board, climbing 5 per cent, or 42.5p, to 832.5p, while Fresnillo was up 36.5p to 732.5p.
The biggest FTSE 100 risers were Antofagasta, up 42.5p to 832.5p, Fresnillo up 36.5p to 732.5p, Tullow Oil up 44.5p to 907.5p and Anglo American up 65p to 1397.5p.
The biggest FTSE 100 fallers were Intertek, down 100p to 2879p, BSkyB down 24.5p to 845p, Mondi down 29p to 1014p and Associated British Foods down 71p to 2625p.
15.25: The Footsie held firm in late afternoon trade, shrugging aside an opening drop on Wall Street, with the UK blue chips underpinned by strength in heavyweight mining stocks.
With an hour of trading to go, the FTSE 100 index was up 7.3 points at 6,827.2 with miners boosted by positive comment from Citigroup, which put a buy rating on the sector for the first time in 3 years, and after well-received fourth quarter results from Rio Tinto.
US stocks, however, fell back in early deals, with the Dow Jones Industrial Average down 59.0 points at 16,423.7 as a disappointing batch of corporate earnings countered some benign economic data.
Footsie fine: The UK blue chip index consolidated recent gains, holding at an 8 month high.
The number of Americans filing new claims for unemployment benefits fell for a second week last week, down by 2,000 to 326,000 suggesting the sharp drop in job growth for December reported last week was likely to be temporary.
Meanwhile the US consumer price index increased 0.3 per cent in December, after being flat in November. In the 12 months to December, consumer prices rose 1.5 per cent after advancing 1.2 per cent in November. The increases were in line with economists’ expectations. The Federal Reserve targets annual inflation at 2.0 per cent.
The US central bank last month signalled the start of a reduction in the pace of its monthly bond purchases, but persistently low inflation is expected to see it hold interest rates near zero for a long time even if the jobs market picks up significantly.
But US corporate earnings news was less positive today, with disappointing numbers from two major banks a big drag.
Goldman Sachs reported a 21 per cent drop in quarterly profit as revenue from fixed-income trading fell, while Citigroup posted a lower-than-expected quarterly profit also due to a decline in fixed-income revenue, with both banks highlighting a ‘challenging trading environment.’
There was also bad news from Best Buy, the number one US consumer electronics retailer, which saw its shares fall more than 28 per cent after it reported a drop in holiday sales and forecast a bigger-than-expected decline in quarterly operating margins.
In London there were mixed performances from retailers as traders mulled over a flood of Christmas trading updates.
Among the bigger players, Home Retail Group took on 3.2p at 204.2p after it said Argos same-store sales rose 3.8 per cent and its Homebase DIY chain improved by 4.7 per cent. The group said it now expects profits to be towards the top end of the current range of market expectations of 90million to 109million.
But blue chip Dixons Retail Group, which owns PC World and Currys, fell 1.4p to 48.9p as its like-for-like sales rose 5 per cent in the UK and Ireland but with margins slightly lower.
Further down the high street, strong sales of advent calendars and a new range of chocolates based on festive film favourite The Snowman helped retailer Thorntons serve up a 6.3 per cent hike in sales over Christmas.
Supermarket sales were once again the star performer for the confectioner, but its embattled high street stores returned to like-for-like growth, with sales up 3.5 per cent after slipping back by 0.4 per cent in the previous three months in a sign that turnaround efforts are bearing fruit. Thorntons shares added 1.5p at 144.7.
But Games Workshop Group saw its shares plunge by 162p to 548.5p after the Dungeons & Dragons firm reported a 31 per cent drop in first-half pre-tax profit.
12.55: London shares maintained modest gains around midday, as investors consolidated recent advances awaiting fresh direction from Wall Street, with US inflation numbers and corporate earnings due from more US banks.
The FTSE 100 index was up 0.5 points at 6,820.4 at lunchtime, holding around an 8 month peak.
Toby Morris, Senior Sales Trader at CMC Markets: ‘Many investors had tipped January to be a month of potential consolidation, for equity bulls to count their 2013 winnings ahead of a reallocation for the New Year. However it looks like 2014 has done nothing to change sentiment for now, with markets still jumping on any opportunity to open the throttle as yesterday’s move confirmed.’
Footsie consolidates: The FTSE 100 index held modest gains ahead of key US inflation data and further earnings numbers from US banks.
‘Given yesterday’s move was in part provoked from strong earnings data from the US traders will again look to the US open to pivot the day’s session, with Goldman’s and Citigroup set to release pre-market,’ Morris added.
Miners led the way in London’s top-flight boosted by positive broker comment and after Rio Tinto posted well-received fourth quarter results that saw record iron ore production and cost cutting ahead of target for the year.
The update prompted analysts at Canaccord Genuity to predict a small upgrade to earnings forecast for Rio Tinto as the stock climbed 98.5p to 3,352.5p.
Fellow miner Anglo American that topped the FTSE 100 risers’ board, adding 57.5p, to 1,390.0p, while BHP Billiton gained 65.0p to 1,856.5p supported by a Citigroup upgrade to buy.
The US bank also raised its overall rating for the mining to sector to bullish from neutral, the first time it had taken such as position on the mining industry in three years.
Meanwhile a flood of Christmas sales updates kept the retail sector in focus.
Halfords set the pace in the FTSE 250, up 34.2p to 495.2p after the retailer reported a 5.2 per cent rise in like-for-like sales, driven by significant growth in its bicycle department.
Home Retail Group was 6.0p higher at 207.0p, after Argos same-store sales rose 3.8 per cent and its Homebase DIY chain improved by 4.7 per cent.
But Primark owner Associated British Foods dropped 103p to 2,593p as a strong sales at the discounted clothing retail was countered by a weaker than expected performance from its sugar business. Numis cut its recommendation for AB Foods to sell from hold.
And oil explorer Premier Oil, which has projects in the North Sea, Vietnam and the Falklands, has dropped 13.1p to 249.9p after it gave a disappointing update suggesting flat production levels in 2014.
10.00: The Footsie managed a modest advance as the morning session progressed, with investors content to consolidate recent gains rather than push too far ahead.
The FTSE 100 Index was up 1.4 points at 6,821.3 by midmorning, holding near an eight month high and close to last year’s peak levels.
Gains by heavyweight mining stocks provided the biggest boost for the blue chips today led by BHP Billiton, which added 64.0p to 1,855.5p after Citigroup upgraded its rating for the stock to buy from neutral in an upbeat sector review.
Miners high: Strength in index heavyweight miners drove Footsie’s gains as Citigroup turned positive on the sector
The mining sector was the worst-performing equity sector in 2013, with the industry dogged by concerns over a possible slowdown in economic growth in China, which is the world’s biggest consumer of metals.
However, analysts at Citigroup thinks the miners are due for a rebound this year, and the bank has raised its overall rating for the sector bullish from neutral, the first time it had taken such as position on the mining industry in three years.
‘Improvements in European and U.S. growth are supportive for commodities and weakening commodity currencies are providing a fillip for the miners,” Citigroup analysts said in a note.
Meanwhile, Rio Tinto gained 87.0p at 3,340.0p after today reporting big increases in the production of iron ore and other minerals in 2013, betting China’s massive economic growth will provide a ready market for decades to come.
The biggest blue chip riser was water firm United Utilities, which jumped 28.7p to 687.7p after an upgrade in rating to overweight by Morgan Stanley.
‘The 2014 regulatory review will clearly be tough but this is surely well known. We expect clarity on allowed returns shortly, which should remove uncertainty, and we think fears of dividend cuts are overdone. UU is our top pick,’ Morgan Stanley analysts said in a note.
Fellow water blue chip Severn Trent was also higher up 42.0p at 1,683.0p, with Morgan Stanley maintaining its equal-weight rating on the stock but saying its valuation is in line and there are better attractions elsewhere.
Retailers were again a big focus on a ‘Super Thursday’ for sector trading updates, with Halfords and Argos owner Home Retail Group winning the backing of investors today after the pair posted strong Christmas updates.
Halfords set the pace in the FTSE 250 index, up 30.8p to 492.7p, after the retailer reported a 5.2 per cent rise in like-for-like sales, driven by significant growth in its bicycle department.
Home Retail Group added 7.3p to 207.9p, after Argos same-store sales rose 3.8 per cent and its Homebase DIY chain improved by 4.7 per cent. The group now expects profits to be towards the top end of the current range of market expectations of 90million to 109million.
But blue chip Dixons Retail Group, which owns PC World and Currys, fell 1.4p to 48.9p as its like-for-like sales rose 5 per cent in the UK and Ireland but with margins slightly lower. Dixons’ chief executive Sebastian James said it had been a ‘lively Christmas with plenty of ups and downs’.
Elsewhere, shares in bookmaker Ladbrokes were higher following a trading update amid relief that it expects profits for the year to meet City forecasts.
The stock, which has fallen recently due to a run of poor football results and the threat of regulation on fixed odds gaming machines, was 3.4p higher at 176.4p. William Hill added 1.5p to 374.1p.
08.30:The FTSE 100 has opened up 2.8 points at 6,822.7, as a fresh update reassures investors the US economy is strengthening despite a wobble over a poor jobs report last week.
Growth continued at a moderate pace across the Atlantic from late November through the end of 2013, with some regions expecting a further pick-up, the Federal Reserve said in its Beige Book. Its bulletin, published late yesterday, offers a snapshot of current economic conditions in the US.
Wall Street ended the session higher, with the S&P500 racking up another record close.
Improved confidence: US economy is apparently strengthening despite a wobble over a poor jobs report last week
Michael Hewson of CMC Markets said investors had set aside concerns about Federal Reserve ‘tapering’ – cuts to the central bank’s vast stimulus programme – and become more comfortable with the idea that the US economy looked set to show continued resilience.
‘Last nights “Beige Book” survey appears to point to a continued recovery in economic activity, with eight of the 12 Fed districts reporting an increase in hiring, which does seem to suggest that that last week’s payroll number could well have been an outlier, and as such could be subject to a revision higher next month, when the January payrolls gets released.’
The FTSE 100 rose to its highest closing level in eight months yesterday, ending up 53 points at 6,819.86.
Stocks to watch today include:
HOME RETAIL: The household goods retailer said the head of its Argos business John Walden would replace outgoing chief executive Terry Duddy.
DIXONS RETAIL: The electricals retailer posted a rise in sales in the key Christmas trading period, gaining market share from rivals.
RIO TINTO: The miner reported big increases in the production of iron ore and other minerals in 2013, as it bets China’s massive economic growth will provide a ready market for decades to come.
ASSOCIATED BRITISH FOODS: The firm said sales at its Primark discount fashion chain recovered over Christmas after they were dampened by unseasonably warm autumn weather, although performance at its sugar unit was weaker than expected.
EXPERIAN: The credit data group posted higher revenues and announced a management reshuffle. Chief executive Don Robert will replace John Peace as chairman while finance director Brian Cassin will replace Robert as chief executive.
OCADO: The online grocer posted gross sales growth of 21.3 per cent in the six weeks to January 5, reflecting strong trading in the seven days up to Christmas.
ABERDEEN ASSET MANAGEMENT: The fund management company said clients withdrew a net 4.4billion in the last three months of 2013 as sentiment turned against emerging market investments.
LADBROKES: The betting company said it expected its operating profit to be around the middle of the current range of market expectations.
SVG CAPITAL: Aegon is to sell its 7.5 per cent stake in SVG Capital.