UK markets cheer retailers and housebuilders
Encouraging comments from both the retail and property industries combined with supportive eocnomic data to fuel a FTSE rally
The FTSE 100 index gained 70.7 points to edge back up above 5,100, settling 1.4% higher at 5,107.9. The FTSE 250 index surged 236.1 points or 2.7%, bolstered by housebuilders, to close at 8,992.8.
Stock markets around the globe took their lead from Asian markets on Wednesday, with European indices and Wall Street all notching up solid gains. In the United States, suspicions that the Federal Reserve will later today point to interest rates remaining at their record lows for some time yet provided the market with an extra boost, as did a report showing that new orders in the country’s services industries increased last month.
Similarly, the UK’s Chartered Institute of Purchasing and Supply today revealed the Purchasing Managers’ Index for the services sector climbed to 56.9 on October, marking the highest reading in over two years and the sixth consecutive month that the index has come in above 50.
However, in light of tomorrow’s outcome of the Bank of England’s two-day monetary policy committee meeting, the impact of economic data on British financial markets was muted today. Governor Mervyn King’s committee is expected to announce it will expand its asset purchase programme—potentially by another £50 billion.
In other economic news, Nationwide’s consumer confidence reading came in at an unchanged 72 last month—its highest level in 18 months—which conveniently ties in with the underlying message coming from retailers Marks & Spencer and Next, both of which this morning reported forecast-busting results.
Shares in M&S jumped 6.0% after beating market expectations for its first half numbers and stating that it has had “a good start” to the third quarter. A number of analysts this morning began to raise their full-year forecasts for the group.
Next shares also received a fillip, rising 5.6% after the high street and directory retailer upgraded its full-year guidance and said it sees consensus estimates increasing by 7%.
Other retailers benefited from their peers’ reassuring updates, with Burberry and Debenhams climbing a respective 6.1% and 6.0%.
Elsewhere, metal extractors Fresnillo, Kazakhmys and Xstrata led the mining sector higher, each gaining 5.9%-9.2% on the back of stronger commodity prices, including gold hitting another record high as the dollar eased. We think the greenback is set to weaken over the next decade but could experience a rebound in the short term as stock markets pause for breath.
On the second line, housebuilders set the pace after the UK’s largest industry player, Taylor Wimpey, said the UK housing market remains significantly better than last year and ordered house prices have risen by an average of 9% since the first half.
Taylor Wimpey jumped 8.2% on the FTSE 250 index, but competitor Barratt Developments surged ahead with a 12.7% gain and Redrow, Bellway and Bovis Homes took on 5.1%-7.3% apiece.
