The London market broke a four-day losing streak as the week’s spate of sterling-induced selling eased and consumer stocks from Burberry to Unilever put in robust performances.
The marginal gains for the FTSE 100 were not enough to reverse Wednesday’s fall into losses for the year for the benchmark.
But UBS maintaining that Burberry was its “preferred turnround name in luxury” and top pick in that European sector helped to push the fashion house to among the top risers on the UK blue-chip index.
The group had been hit by its sharpest one-day fall in six months on Wednesday after reporting slowing sales growth with particular weakness in the US.
But UBS analyst Helen Brand reiterated “buy” advice, arguing that the market was underestimating the apparel company’s productivity potential.
“We believe there is more upside to productivity and cost savings than the market is currently willing to attribute credit for,” she said. “Reassuring for us was that the Chinese consumer accelerated to almost 10 per cent growth in the quarter with the main drag coming from the US market partly due to a shorter promotional period.”
Burberry jumped 1.7 per cent to £15.92 with UBS’s 12-month price target looking to £19.90.
“A mixed bag of corporate results kept the FTSE 100 near break-even and still in negative territory for the year after its snap-election slump,” said Jasper Lawler, of London Capital Group. “The lesson for UK investors this week has been that currency-related gains are easy come, easy go.”
The FTSE 100 rose 0.1 per cent, or 4.18 points, to 7,118.54 but the FTSE Mid 250 index of mid-caps slipped 0.2 per cent for only its second fall in the past 11 trading sessions.
“The FTSE 250 has been outperforming the UK’s blue-chip index, particularly since the start of February this year,” said Kathleen Brooks, of City Index. “It suggests that investors’ may have overplayed the impact of Brexit on the UK’s smaller index, hence why it has been playing catch-up with the FTSE 100 this year.”
One of Thursday’s main drags on the London market was equipment hire group Ashtead as investors dropped the stock in a read-across from a US rival’s woes.
United Rentals, the biggest equipment hire group by market share in the US, was hit by an earnings miss on Wednesday, fanning worries over how much the sector will actually be lifted by President Donald Trump’s fiscal expansion plans.
“Delays to US corporate tax cuts and possible $1tn of infrastructure spend has led to an Ashtead pullback,” said Justin Jordan, analyst at Jefferies, but argued that the correction provided an attractive valuation for the stock.
Ashtead fell 2.7 per cent to £15.80 with Jefferies maintaining “buy” advice and a price target of £20.
Unilever led the FTSE leaderboard in morning trading before later paring gains as the Anglo-Dutch consumer staples group reported better than expected growth in the first three months of the year.
The target of a hostile takeover bid by US rival Kraft Heinz this year, Unilever closed 0.3 per cent higher at £39.50 with Liberum analysts arguing: “Post bid, the Unilever organisation appears galvanised to take more urgent steps to unlock value across the group. However, with Unilever shares up 21 per cent since the bid, we see a lot of market expectation baked into the group’s share price.”