Yesterday's trading: Next boss fails to lift the gloom
As far as the High Street is concerned, there ain't no cure for the summertime blues. Or is there? Most of it went on sale weeks ago with many top stores offering mega discounts of anything up to 70% off summer ranges.
Geoff Foster: Early June got off to a strong start on the High St.
Early June certainly got off to a strong start with holiday wear, discount designer labels and Father's Day helping to push sales.
However, trade since has apparently tailed off with the Mediterranean-type weather in the UK and growing unemployment fears keeping hordes of shoppers either over the local park or at home watching Wimbledon.
David Keens, finance director of fashion retailer Next, did his best on Wednesday to allay fears about retailers prospects when he popped in for a chinwag with the sales team at top US broker Goldman Sachs.
He was fairly upbeat and confirmed that the market remains better than the majority of retailers had planned for.
Stocks remain tight at Next, prices across the industry are expected to rise, while rental contracts currently being re-negotiated are coming through at better levels.
Keens' comments moved Goldmans to suggest that Next is one of the best managed businesses in the sector with a strong focus on cash returns. It advised clients to buy up to 1738p. The shares responded with a rise to 1592p before closing 38p better at 1567p.
Citigroup also helped the high street's cause by turning positive, citing improved consumer cashflow prospects following lower mortgage payments and reduced household bills.
It upgraded Marks & Spencer, fresh from surviving Wednesday's AGM shareholders revolt over Sir Stuart Rose's dual role as executive chairman and chief executive, to buy from hold.
The close was 7½p better at 313¾p. Argos catalogue group Home Retail fired 6½p to 266p for the same reason.
The Bank of England's decision to leave interest rates on hold at 0.5% came as no surprise but its decision not to extend its £125bn asset purchase plan by a further £25bn certainly did.
It encouraged fund managers to take profits and the Footsie closed below the best with a gain of 18.43 points at 4,158.66.
Aluminium giant Alcoa overnight got the second-quarter US reporting season off to a promising start with a narrower-than-expected loss and traders in New York heaved a collective sigh of relief. But Wall Street was unimpressed, closing just 0.53 points up at 8177.88.
Silver miner Fresnillo jumped 44½p to 486.85p after Citigroup upgraded to buy from hold. It believes the outlook for silver is improving and it will outperform gold.
Worries about the dividend continues to plague Aviva, 12p down at 291p. Standard & Poor's Equity Research downgraded to sell from hold and slashed its 12-month target price to 287p from 373p.
It reckons the insurer will have to make further disposals to support its cash position. Solvency is vulnerable to declining property prices, defaults on loans secured on commercial property, bond defaults in the US and tighter implementation of solvency rules by the FSA. It still forecasts a 50% dividend cut.
Morgan Stanley bolstered Legal & General, 1½p better at 51¼p. It advised clients to fill their boots as solvency fears here have been overblown and the market is pricing in a worst case scenario for the insurer.
Car insurer Admiral accelerated 22½p to 888p after Bank of America/Merrill Lynch upgraded to buy with a price target of 1050p. The stock has underperformed the sector by 11% over the past three months. The growth story remains intact and the rating is inexpensive.
Advanced Medical Solutions improved ¾p to 26¼p after entering an agreement with Stryker Corporation for global marketing and distribution of certain of its LiquiBand wound closure products for use in face and head surgical procedures. LiquiBand is a high-tech superglue used as an alternative to stitching for wounds after surgery.
Northern Petroleum gushed 6p to 106½p following encouraging gas field flow results from its Grolloo prospect in the Netherlands. Sirius Exploration, the diversified mining and exploration company, edged up to 3p after signing an option over 52% of AusPotash Corporation, a Canadian company that holds exploration permits covering a 150 sq kilometre area in Queensland, Australia.
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