London’s FTSE 100 registered a slight gain heading into Thursday afternoon, in a slightly more positive day for equities after a tricky start to the year.
Retailers Next and JD Sports sat at either side of the FTSE 100 after contrasting festive updates.
Equities in New York are called to open higher with focus on the afternoon’s employment data from payroll processor ADP. The official nonfarms reading lands on Friday.
‘The next big event on the economic calendar is Friday’s nonfarm payroll US jobs report release. A disappointing number could tilt expectations once again in the direction of a considerable unwinding of the Federal Reserve’s restrictive monetary policy in 2024, a scenario that would likely bring back risk appetite, driving lower yields and a weaker dollar,’ ActivTrades analyst Ricardo Evangelista commented.
The FTSE 100 index was up 7.08, or 0.1%, at 7,689.41. The FTSE 250 was up 14.33 points, 0.1%, at 19,340.73, and the AIM All-Share was up 0.28 of a point, marginally up, at 754.34.
The Cboe UK 100 was up 0.1% at 767.56, the Cboe UK 250 was up 0.2% at 16,806.97, and the Cboe Small Companies was up 0.4% at 14,916.62.
The UK service economy had its best performance in six months in December, a strong end to the year which helped boost the wider private sector, numbers showed.
The final S&P Global UK services business activity index climbed to 53.4 points in December from 50.9 in November. This was above the 50.0 no-change mark for the second month running and above the earlier flash estimate of 52.7
The final seasonally adjusted S&P Global UK composite purchasing managers’ index registered 52.1 points in December, up from 50.7 in November and above the neutral 50.0 value for the second month running. This beat last month’s flash estimate for December of 51.7 points and marked the highest final reading since June.
‘The further rebound in December’s PMI suggests a recession should be narrowly avoided,’ said Pantheon Macroeconomics analyst Gabriella Dickens.
In European equities on Thursday, the CAC 40 in Paris was up 0.4%, while the DAX 40 in Frankfurt was up 0.3%.
The eurozone service sector’s decline slowed marginally in December, according to survey data from S&P Global.
The latest HCOB services purchasing managers’ index posted 48.8 points in December, rising marginally from 48.7 in November and marking the fifth consecutive monthly contraction. The figure remained below the 50-point no-change mark, but registered above the flash estimate of 48.1 points.
S&P Global said demand for services fell at the end of the year, while sales and new business receipts also declined.
The HCOB eurozone composite PMI - a weighted average of the eurozone’s manufacturing and services PMIs - posted 47.6 points in December, unchanged from November, and remaining below the 50-point threshold.
Sterling was quoted at $1.2705 at midday on Thursday, higher than $1.2646 at the London equities close on Wednesday. The euro traded at $1.0958, higher than $1.0915. Against the yen, the dollar was quoted at JP¥144.19, up from JP¥143.50.
In the FTSE 100, Next rose 4.7%. The retailer said full price sales during November and December were better than it anticipated.
In a trading update covering the nine weeks to December 30, Next said full price sales were up 5.7% from a year earlier, which was £39 million than its previous guidance of a 2.0% rise for the period.
Next upped its full-year pretax profit guidance by £20 million, or 4.0% to £905 million compared to last year, saying £17 million of the lift comes from the sales beat to date and £3 million from an upgraded forecast for full price sales in January.
JD Sports plunged 23%, after cutting its profit outlook amid weaker-than-expected sales growth and gross margins.
The retailer said organic revenue was up 6.0% in the 22 weeks that ended December 30 on a constant currency basis from a year earlier, with like-for-like growth of 1.8%. This was slightly behind its expectations. The retailer expects organic revenue growth of around 8% for the year ending February 3.
As a result, it expects to report pretax profit and adjusted items of between £915 million and £935 million for the financial year. This falls short of market expectations of £1.04 billion, which back in September, JD Sports had said it expected to meet.
‘Our key markets have seen increased promotional activity during the peak trading season, driven by a more cautious consumer, but we continue to grow market share,’ said JD Sports Chief Executive Officer Regis Schultz.
‘We are confident in our strategy and we continue to invest in our supply chain, systems and stores, supported by our strong cash generation and healthy balance sheet.’
Oil majors BP and Shell rose 1.8% and 0.9% respectively, tracking higher oil prices. Brent oil bought $78.87 a barrel early Thursday, higher than $78.13 on Wednesday, as traders assess latest developments in the Middle East.
‘The region remains a tinder box due to the Israel-Gaza war, and disruption to shipping routes through the Red Sea is also a key factor behind the surge in crude,’ AJ Bell analyst Russ Mould commented.
Among London’s small-cap stocks, Topps Tiles lost 7.0%.
The retailer said sales in the 13 weeks ended December 30 were down 4.0% from a year earlier, with like-for-like sales down 7.1%.
It explained that trading in the first quarter reflected the ongoing challenges to discretionary consumer spending, particularly those impacting on businesses serving the repair, maintenance and improvement sector.
Topps Tiles expects its full-year profit to be weighted towards the second half, based on a number of factors including the timing of the holiday pay accrual, higher energy usage in the first half and general trading in the first half.
On AIM, Angle soared 66%, after it unveiled ‘breakthrough’ clinical results from DNA molecular analysis of cancer patient blood samples that ‘provide a unique insight into the progression of each patient’s cancer and how this may be treated’.
The medical diagnostics firm said the results ‘highlight the potential for the Parsortix system to identify key variants [of] DNA mutations missed by other approaches to help guide treatment decisions.’
Stocks in New York were called higher. The Dow Jones Industrial Average, the S&P 500 index up and the Nasdaq Composite were all called up 0.2%.
On the US data calendar on Thursday, there is the ADP jobs report at 1315 GMT, a precursor to Friday’s nonfarms. The latest initial jobless claims reading is at 1330 GMT, before a services PMI at 1445 GMT.
The data comes after minutes from the Federal Reserve’s latest meeting were released overnight.
‘Yesterday’s FOMC minutes brought a little bit of something for everyone, with members expressing caution as they attempt to drive inflation back down to target. While they currently do not see any upside risk to inflation, there is a concern that they could stall the current disinflation should they pivot too swiftly. Nonetheless, the key takeaway is that they are looking at the six-month metric for the core PCE, which has already dropped below 2%,’ Scope Markets analyst Joshua Mahony commented.
‘With that in mind, markets have remained highly dovish, expecting a whopping six rate cuts this year from the Fed. All eyes will now turn towards the US employment data, with today’s ADP payrolls figure leading into tomorrow’s jobs report. With Fed member Barkin speculating that a soft-landing looks increasingly likely, a gradual deterioration in the payrolls and unemployment rate could help put pressure on the FOMC to cut rates in March.’
Gold was quoted at $2,047.78 an ounce at midday on Thursday, higher than $2,038.89 on Wednesday.
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