FTSE 100 close: Shares gain on bright retail news

By Ed Monk for Thisismoney.co.uk
Updated: 12:04 EDT, 21 July 2009

The British shopper is back with a vengeance as strong trading news from Morrisons and Next pushed the FTSE 100 higher.

Levelling off: Will shares fall after six days of gains?

Morrisons led shares with a 8.2% gain, up 20.75p to 274p, when the supermarket chain said that growth, supply chain improvements and other cost savings meant full-year results will be ahead of its earlier expectations.

The optimism spread to rivals Sainsbury's and Tesco with gains of 9¾p to 326p and 5p to 375p respectively.

Overall, the FTSE 100 managed to build on the past six straight days of gains, closing 37.6 points up at 4481.2.

The retail sector was spurred further when fashion chain Next raised profit forecasts for the second time in three months.

Next's update said the much better weather had helped to lift high street sales by between 2% and 3% in the 25 weeks to July 18. It means that falls in like-for-like sales over that time should sit around 1.9% - far better than the 6% to 9% fall that had been feared.

Paradoxically, shares in Next fell on the news, down 26p to 1,618p, and fellow big High Street names followed suit. Marks & Spencer was 4p down at 326p and B&Q owner Kingfisher lost 4.5p to close at 202.5p.

The nationalised banks ended the day in the black, as Lloyds Banking Group added 1.43p to 73.44p and Royal Bank of Scotland grew 0.025p to 39.82p.

Friends Provident was one of the session's biggest fallers - off 1.83p to 71.4p - after the life and pensions dismissed a second and sweetened takeover advance from investment firm Resolution.

In a slow day for corporate news, Severn Trent released a trading update that was in line with previous forecasts, although Severn said a decline in consumption had continued, and that this will impact revenues by around £15m to £20m in the current financial year. The news left Severn share 4p higher at 1,092p.

Fuller, Smith and Turner sales figures showed the brewer and pub company enjoyed a strong start to its financial year, with like-for-like sales in its managed pubs and hotels up 2.9% after the recent heatwave boosted sales growth from the 1.8% seen in early June.

Broker Charles Stanley upgraded the stock from 'add' to 'buy'. It pointed out that while net debt is up slightly to £112m due to recent pub acquisitions from Punch Taverns, the company remains one of the lowest geared in the sector. The broker retains a price target of 575p. The shares, which saw a powerful rally to 540p dry up last month, lost 0.5p to close at 81.75p.

Tomorrow's agenda

Glaxosmithkline has received a swine flu booster. The drugs giant posts second-quarter results tomorrow, with analysts forecasting a 6% jump in pre-tax profits to £1.95bn, thanks in part to the weak pound.

But the pandemic will overshadow the figures, with chief executive Andrew Witty likely to get a grilling on the development of a vaccine against the virus and on expectations for sales of its Relenza anti-viral treatment.

GSK has turned two plants into H1N1 vaccine factories, and experts believe it will play a key role in the global fight against the virus. Glaxo has already taken orders worth about £600m but is tipped to rake in a total of almost £1.3bn in sales of treatments. It is a welcome boost at a tough time for the major pharmaceuticals players, who have been losing ground to generic rivals.

The Bank of England publishes minutes from this month's meeting of rate-setters. The monetary policy committee decided against extending the quantitative easing programme at the start of the month, surprising many in the City who feared that the central bank was halting the programme.

But Deputy Governor Charlie Bean has since claimed that the MPC is simply adopting a wait and see approach and that August, when the Bank publishes papers, is a more sensible time to make a decision.