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London close: Stocks finish higher after solid company updates

London stocks finished in positive territory on Wednesday, though the top-flight index slipped just below the 7,000-point level late in the session, as investors mulled the latest UK borrowing figures, with solid updates from the likes of Next and Future helping to boost sentiment.
The FTSE 100 closed up 1.7% at 6,998.28, and the FTSE 250 was ahead 1.91% at 22,541.97.

Sterling was in the green as well, last strengthening 0.46% against the dollar to $1.3691, and fainting 0.39% on the euro to €1.1613.

“‘Global rebound’ certainly appears to be the theme among the leaders on the FTSE 100 today, as the market’s outlook swings back to optimism from Monday’s pessimism,” said IG chief market analyst Chris Beauchamp.

“Rolls-Royce, IAG and Compass Group are all good names to pick for those looking for a renewed economic recovery, while real estate investment trusts like Land Securities and British Land should see further inflows if more retailers post updates like the one from Next this morning.

“Speaking of Next, the trading statement this morning has been just the ticket for a share price that looked in need of some direction, having essentially gone nowhere since January, and today’s strong report across the board certainly provides a springboard for more good news into the second half of the year.”

In economic news, figures released earlier by the Office for National Statistics showed that public sector net borrowing fell in June as the economy opened up again.

Net borrowing came in at £22.8bn last month, down £5.5bn from June 2020 and undershooting the Office for Budget Responsibility’s forecast of £25.2bn.

Still, the figure was above consensus expectations of £20bn and marked the second-highest level for June on record.

Public sector net debt came in at £2.2bn at the end of June, or around 99.7% of GDP, which was the highest ratio since the 102.5% recorded in March 1961.

Ruth Gregory, senior UK economist at Capital Economics, said the fact that borrowing undershot the OBR’s forecast again in June reinforces her view that the economy can do more of the job in “fixing” the public finances than a fiscal tightening.

Gregory said that while debt service costs will probably stay higher than the OBR estimated over next few years, the public finances should continue to reap the benefits of a faster and fuller recovery in GDP than the OBR expects, meaning that the deficit should still fall faster.

“That said, we suspect the Chancellor will ‘bank’ any improvement in the deficit rather than scale back the planned tax hikes and spending cuts set to hit the economy.

“At least by 2022-2023, the economy should be strong enough to cope with it.”

On the corporate front, fashion retailer Next surged 7.47% after it lifted full-year profits guidance, following a sales rebound in the second quarter.

In an unscheduled trading update, the company said it now expected annual pre-tax profits of £750m, up £30m from previous forecasts and towards the top end of estimates.

Future was ahead 9.16%, after the magazine publisher and GoCompare owner said full-year profitability was set to be “materially ahead” of current market expectations amid a continued strong performance.

Computacenter gained 5.69% after saying it expects adjusted pre-tax profit for the first half to be around 50% ahead of the same period a year ago.

Elsewhere, stocks with big exposure to Covid-related restrictions rose, with catering group Compass up 5.63%, British Airways owner IAG ascending 5.58%, engine maker Rolls-Royce ahead 7.75%, Premier Inn owner Whitbread jumping 6.09%, and InterContinental Hotels moving forward 3.76%.

Compass was also boosted by an upgrade to ‘buy’ from ‘hold’ at Jefferies.

Wickes was 2.11% higher after confirming its first-half profit guidance as it said group sales have continued to perform well, with like-for-like growth for the 26 weeks to 26th June of 33.1% year-on-year, and 22.4% on a two-year basis.

On the downside, Royal Mail slumped 2.71% after it said revenues rose 12.5% in the first quarter as people continued to shop online with Covid lockdown restrictions still in place, but that UK parcel volumes had started to slip as curbs were lifted.

Avast was off 1.46% by the close, after a downgrade to ‘neutral’ from ‘buy’ at Goldman Sachs.

Market Movers

FTSE 100 (UKX) 6,998.28 1.70%
FTSE 250 (MCX) 22,541.97 1.91%
techMARK (TASX) 4,383.01 1.58%

FTSE 100 – Risers

Rolls-Royce Holdings (RR.) 97.00p 7.75%
Next (NXT) 7,946.00p 7.47%
Whitbread (WTB) 3,012.00p 6.09%
Compass Group (CPG) 1,492.00p 5.63%
International Consolidated Airlines Group SA (CDI) (IAG) 169.42p 5.58%
Intermediate Capital Group (ICP) 2,131.00p 5.13%
3i Group (III) 1,212.00p 4.62%
Associated British Foods (ABF) 2,086.00p 4.38%
Antofagasta (ANTO) 1,420.00p 4.25%
Land Securities Group (LAND) 690.20p 4.13%

FTSE 100 – Fallers

Royal Mail (RMG) 516.20p -2.71%
Polymetal International (POLY) 1,538.50p -1.88%
Avast (AVST) 581.40p -1.46%
Hikma Pharmaceuticals (HIK) 2,603.00p -0.88%
Fresnillo (FRES) 762.60p -0.83%
Reckitt Benckiser Group (RKT) 6,362.00p -0.66%
Unilever (ULVR) 4,303.00p -0.43%
Severn Trent (SVT) 2,694.00p -0.33%
Relx plc (REL) 2,033.00p -0.25%
Just Eat Takeaway.Com N.V. (CDI) (JET) 5,736.00p -0.12%

FTSE 250 – Risers

Cineworld Group (CINE) 67.06p 14.87%
Carnival (CCL) 1,465.40p 9.36%
Future (FUTR) 3,504.00p 9.16%
National Express Group (NEX) 255.60p 9.04%
FirstGroup (FGP) 79.55p 7.72%
SSP Group (SSPG) 240.60p 7.22%
WH Smith (SMWH) 1,614.50p 6.60%
Micro Focus International (MCRO) 410.80p 6.56%
Hammerson (HMSO) 37.75p 6.07%
Wetherspoon (J.D.) (JDW) 1,124.00p 6.04%

FTSE 250 – Fallers

Network International Holdings (NETW) 352.90p -4.10%
Hilton Food Group (HFG) 1,076.00p -2.35%
QinetiQ Group (QQ.) 334.80p -1.99%
Moneysupermarket.com Group (MONY) 254.60p -1.47%
Biffa (BIFF) 338.50p -1.31%
HGCapital Trust (HGT) 371.00p -1.07%
Trustpilot Group (TRST) 353.00p -0.95%
3i Infrastructure (3IN) 302.00p -0.82%
Spirent Communications (SPT) 257.40p -0.62%
Pagegroup (PAGE) 598.00p -0.58%

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