By This Is Money Reporters
17.30 (CLOSE): Marks & Spencer’s failed to convince investors that it was back on track as its shares suffered a sharp reversal following its latest trading update.
The stock initially rose 3 per cent but later swung 3 per cent lower to lead the blue-chip fallers’ board despite a 0.6 per cent rise in underlying clothing sales in the quarter to March 29.
The wider FTSE 100 Index also surrendered early gains which had seen it 50 points ahead to finish the session just 6.4 points up at 6642.
Reversal: M&S shares dropped back after initially rising following modest rises in their clothing division.
Confidence was earlier boosted by Federal Reserve minutes showing that policymakers wanted to be absolutely certain the US economy was on the recovery path before starting to raise interest rates.
As expected, the Bank of England kept interest rates on hold at its monthly meeting, with economists confident that there will be no change until next year.
In a sign of improved confidence, Greece tapped the international bond markets for the first time in four years by issuing a five-year bond.
The country, which has been locked out of the market by high borrowing costs since 2010, moved to raise 2.5 billion euros (2.1 billion) in the sale.
But the buoyant mood later faded away amid weak trade data from China and a renewed sell-off on America’s tech-heavy Nasdaq index.
Germany’s Dax and France’s Cac 40 were both in the red as was New York’s Dow Jones Industrial Average.
On currency markets, the pound held firm at 1.68 US dollars and 1.21 euros.
In London, Marks & Spencer’s first rise in underlying clothing sales since the end of 2010 failed to offset worries over margin pressure and declining market share. Shares fell 14p to 442p.
Freddie George, a retail analyst at Cantor Fitzgerald, kept his sell rating on the stock today and warned profits for the year to March 31 were likely to fall to as low as 610 million, compared with 665 million a year earlier.
Rival Next, which announced annual profits of 695 million last month, rose 75p to 6540p, while Primark owner Associated British Foods was 68p higher at 2671p.
Royal Bank of Scotland suffered a choppy day’s trading despite taking a step towards returning to the private sector by agreeing to pay 1.5 billion to the taxpayer in a complex deal which will ultimately enable it to resume future dividend payouts.
Shares initially rose but later fell back 1.1p to 308.7p.
In a largely positive session for the retail sector, Mothercare jumped nearly 15 per cent or 23.8p to 187p after it showed tentative signs of a recovery from its Christmas profits warning.
Underlying sales were 0.3 per cent lower in the 12 weeks to March 29, against a 1.9 per cent fall for the whole financial year.
The biggest FTSE 100 risers were Land Securities, up 29p to 1045p, Associated British Foods up 68p to 2671p, Imperial Tobacco up 49p to 2465p and Fresnillo up 15.5p to 899.5p.
The biggest FTSE 100 fallers were Marks & Spencer down 14p to 442p, ARM Holdings down 25p to 1004p, Morrisons down 4.6p to 197.3p and Antofagasta down 18.5p to 829.5p.
15.00: London shares maintained their gains in late afternoon trading having overcome an earlier wobble, although US stocks made cautious early progress today following big gains in the previous session.
With an hour and an half of trading to go, the FTSE 100 index was up 29.0 points at 6,664.6, midway between the early session peak of 6,688.28 and the session low of 6,620.39.
In early deals on Wall Street, the Dow Jones Industrial Average eased 10.0 points lower at 16,427.2, consolidating after triple-digit gains in the previous session as some lacklustre corporate earnings offset a batch of optimistic economic data.
Fed helps: Minutes from the Federal Reserve’s latest policy meeting yesterday showed a more supportive US central bank than investors had previously expected
Americans filing new claims for unemployment benefits fell to 300,000 last week, the lowest level in almost seven years and well below the 320,000 estimate.
Meanwhile, US import prices increased 0.6 per cent in March, their largest jump in three years, after an unrevised 0.9 per cent increase in February, but there was little sign of a broader pickup in imported inflation.
The broad S&P 500 index yesterday scored its biggest gain since March 4 after minutes from the Federal Reserve’s latest policy meeting showed a more supportive central bank than investors had previously expected.
Among the US fallers after disappointing earnings, home wares retailer Bed, Bath & Beyond saw its shares slump 6 per cent.
Retailer Marks & Spencer was the biggest blue chip faller in London, down over 2 per cent or 10.7p to 445.3p having reversed from a 3 per cent jump earlier in the session.
Worries over margin pressures and market share declines offset initial optimism from the first rise in M&S’s underlying clothing sales since the end of 2010 in a quarterly trading update.
12.45: Blue chip Marks & Spencer suffered a sharp reversal in fortune in lunchtime trade, mirroring a wobble by the overall Footsie as the retailer struggled to convince investors that its clothing sales are back on track.
The FTSE 100 index had surrendered an initial 50 points rise today and dipped into negative territory late morning before recovering to stand 24.6 points higher at 6,660.2.
M&S shares initially gained 3 per cent after a trading update today but by lunchtime they had swung nearly 2 per cent lower as the retailer’s first rise in underlying clothing sales since the end of 2010 failed to offset worries over margin pressure and declining market share.
Global gains: Stock markets rallied today in tandem with strong gains on Wall Street as US rate rise expectations eased
Freddie George, a retail analyst at Cantor Fitzgerald, kept his sell rating on the stock and warned profits for the year to March 31 were likely to fall to as low as 610million, compared with 665million a year earlier.
M&S shares fell 7.7p to 448.3p but clothing retail rival Next, which announced annual profits of 695million last month, still rose 85.0p to 6,550.0p, while Primark owner Associated British Foods was 50.0p higher at 2,653.0p.
Overall market confidence remained underscored by Federal Reserve minutes released last night showing that policymakers wanted to be absolutely certain the US economy was on the recovery path before starting to raise interest rates, which boosted US stocks yesterday.
As expected, the Bank of England kept UK interest rates on hold after its latest monthly meeting, with economists confident that there will be no change until next year.
In another sign of improved market confidence, Greece tapped the international bond markets for the first time in four years by issuing a five-year bond.
European stock markets also recovered from a late morning wobble, with Germany’s Dax 30 index adding 0.3 per cent and France’s CAC 40 index up 0.1 per cent having been knocked earlier by Eurozone deflation concerns after French consumer prices rose less than expected in March.
In London, financial stocks got a boost after the Federal Reserve minutes prompted a shift in expectations of when US interest rates will start to rise.
Henk Potts, equity strategist at Barclays Wealth said: ‘The market probably got a little bit ahead of itself in terms of expectations of the timing of the first rate rise. The market is taking (the Fed minutes) into account and that’s positive for sentiment.’
Among the banks, Royal Bank of Scotland gained 2.1p to 311.9p after it said it had agreed to pay 1.5 billion to cancel an arrangement that gives the government priority over dividends, clearing an obstacle to the lender’s eventual privatisation.
‘The agreement … is a welcome step in the road to RBS becoming a normal bank with the ability to pay dividends to shareholders, which should help in making the share a more attractive proposition to investors,’ analysts at Esprito Santo Investment Bank said in a note.
However, after rising for two straight sessions, analysts said the stock market still looked vulnerable to jitters due to lingering geopolitical tension in Ukraine and concerns about growth in China, the world’s biggest consumer of commodities.
Mining stocks were weak today after Chinese Premier Li Keqiang ruled out major stimulus to fight short-term dips in growth, even as big falls in imports and exports data reinforced forecasts that the world’s second-largest economy has slowed notably at the start of 2014.
Li stressed on Thursday that job creation was the government’s policy priority, telling an investment forum it did not matter if growth came in a little below the official target of 7.5 percent.
Among the miners, BHP Billiton shed 14.0p at 1,928.5p, while Antofagasta lost 5.5p at 842.5p.
Among other blue chip fallers, Royal Mail shares fell over 2 per cent or 10.4p to 504.6p, its lowest levels since October after the delivery company warned on Wednesday that an investigation into wholesale mail price rises would create a period of uncertainty.
Regulator Ofcom said on Wednesday it would investigate a complaint from rival TNT Post. The stock was also lower week as the expiry approaches of the government’s lock-up on its near 30 per cent remaining stake in Royal Mail, although traders say any further share sale ahead of May’s final results would not be taken well.
Regulatory action also knocked British Gas-owner Centrica, which was off 3.8p to 333.8p after news of a 5.6million fine for blocking business customers from switching suppliers from Ofgem. Among other weak utilities, SSE lost 10.0p to 1,476.0p.
On the second line, oil explorer Cairn Energy fell.4.0p to 333.6p after both its deputy chief executive Mike Watts and chief financial officer Jann Brown announced they would be stepping down at May’s annual general meeting.
11.35: London shares saw their gains erased in late morning trade tracking a reversal by European stocks after solid early gains as Eurozone deflation worries returned to haunt the markets.
The FTSE 100 index dipped briefly in to the red before recovering to trade almost flat, up 2.9 points to 6,638.5 having reached a peak of 6,688.28 earlier in the session when it had been boosted by strong overnight gains by US stocks.
In Europe, Germany’s Dax 30 index and France’s CAC 40 index both dropped 0.4 per cent lower with traders citing deflation concerns after French consumer prices rose less than expected in March.
Eurozone glum: European Central Bank president Mario Draghi said last week the bank was ready to deploy anything in its monetary policy toolbox if inflation stays too low
The consumer price index for the euro zone’s second-largest economy rose 0.4 per cent in March from February and was 0.6 percent higher than a year ago, France’s statistics bureau Insee said.
Economists had expected increases of 0.6 per cent on the month and 0.7 per cent on the year.
A week ago, the European Central Bank president Mario Draghi said the bank was ready to deploy anything in its monetary policy toolbox if inflation stays too low.
At a press conference following last Thursday’s ECB council meeting – which had left Eurozone monetary policy unchanged – Draghi said he and his colleagues expected a prolonged period of low inflation and that if it dragged on too long, action would be taken.
He added that printing money – quantitative easing (QE) – had been discussed at the meeting.
Draghi’s comments marked a significant shift in tone from the previous month when the ECB president appeared to set quite a high bar for any monetary action.
09.40: The Footsie pushed higher as the morning session progressed taking heart from Wall Street’s strong overnight rally after minutes from the Federal Reserve showed that policymakers wanted to be absolutely certain the US economy was on the recovery path before starting to raise interest rates.
In early morning trade, the FTSE 100 index climbed 48.4 points higher to 6,683.9, extending the previous session’s rebound after a recent sell-off in tandem with a 1 per cent jump by the Dow Jones Industrial Average following the FOMC meeting minutes.
Markus Huber, senior sales trader/senior analyst at Peregrine & Black said: ‘Although these minutes didn’t contain any major surprises or anything new they provided traders with added assurances that rates won’t go up any time soon and that nothing has changed in the past few months concerning the Fed’s plans to raise rates at some point in the future.
Reassuring update: M&S shares found gains after its latest trading update pleased investors
‘While without a doubt sentiment has improved over the last two days stock markets in general are still at a crossroad and it is not necessarily clear at this stage if the lows are in place for the current move with more upside to come in the days ahead or if current market action merely constitutes a break before not too long the next leg to the downside will be starting to develop,’ he added.
Retail issues were to the fore in London today led by Marks & Spencer, with signs of a sales turnaround for the firm’s clothing ranges helping ease the pressure from City investors on chief executive Marc Bolland.
M&S shares gained 2 per cent or 9.6p at 465.6p after its latest trading update as investors focused on figures showing like-for-like clothing sales rose 0.6 per cent in the quarter to March 29.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers said: ‘The update has been well received by investors, despite the fact that the story largely remains the same.
‘Strategically, M&S is continuing its push into overseas markets (although the position in China is challenging) whilst also driving further into its online offering, where it remains behind some of its more developed competitors.
‘Meanwhile, Food remains a strong contributor to profits, and guidance on profit margins has also been nudged higher.
‘By contrast, General Merchandising is still under pressure, with some improvement in Clothing somewhat overshadowed by a reduction in gross margins due to promotional activity,’ Hunter added.
Among other top flight clothing retailers, Next rose 77.5p to 6,542.5p and Primark owner Associated British Foods lifted 80.5p to 2,683.5p.
Further down the high street, Mothercare jumped 14 per cent or 23p to 186.25p after it showed signs of recovering from its Christmas profits warning, with underlying sales only 0.3 per cent lower in the 12 weeks to March 29, against a 1.9 per cent fall for the whole financial year.
And WH Smith shares gained 40.0p a 1,210.0p after the books, newspaper and stationery retailer raised its first-half payout to shareholders, reflecting its confidence as it posted first half profits up 3 per cent.
High street bank Royal Bank of Scotland was another blue-chip riser as it took a step towards returning to the private sector by paying 1.5billion to the taxpayer in a complex deal ultimately enabling it to resume future dividend payouts. RBS shares rose 5.25p to 315p.
08.30: The FTSE 100 has opened up 21.8 points at 6,657.4 after minutes of the US Federal Reserve’s latest meeting suggested the central bank could be more cautious towards raising rates than investors anticipated.
The Fed’s minutes fuelled a rally on Wall Street with all three major US stock indexes – the Dow Jones, S&P 500 and Nasdaq – closing up more than 1 per cent, and weighed on the dollar.
The market pushed out expectations of a first Fed rate hike by about six weeks to July 2015, trading in interest rate futures showed.
Market watch: Traders welcomed signals from the Federal Reserve that it is in no hurry to hike US interest rates
However, the market’s overall gains could be limited after data showed China’s exports unexpectedly fell for the second straight month in March and import growth dropped sharply, adding to worries about slowing growth in the world’s second-largest economy.
Exports fell 6.6 per cent in March from a year earlier, following an 18.1 per cent slide in February, the Customs Administration said. It was the first time Chinese exports have fallen for two months in a row since 2009.
Chris Weston of IG said: ‘The Federal Open Market Committee minutes showed again that central banks have the power to surprise and after what we’ve seen from the European Central Bank, Bank of Japan and now the FOMC minutes, it seems the script by which the market is keying off is not going to plan. This is causing market positioning to shift around fairly aggressively.
‘The minutes gave a clear message to markets that interest rates are staying low for a long time; however they won’t stay low forever.
‘It also seems that they were designed to be the final word on the interest rate debate that has been ragging since Janet Yellen (seemingly) mistakenly said there would be six-month lag between rounding off the bond-buying program and the Fed hiking rates.’
The FTSE 100 closed up 44.92 points at 6,635.61 yesterday.
Stocks to watch today include:
ROYAL BANK OF SCOTLAND: The bank has agreed to pay 1.5billion to cancel an arrangement that gives the government priority over dividends, clearing an obstacle to the lender’s eventual privatisation.
MARKS & SPENCER: The retailer’s non-food sales fell for an eleventh consecutive quarter, increasing the pressure on management to explain why heavy investment has not yet delivered an anticipated turnaround.
VODAFONE GROUP: India’s Piramal Enterprises Ltd said it agreed to sell a stake of about 11 per cent in the Indian unit of Vodafone to the British group for 89billion rupees (880million).
ROYAL MAIL: The postal company warned an investigation into a rival’s complaint over wholesale mail price rises would lead to a long period of uncertainty around what it charges other operators.