6th Jan 2026 17:04
(Alliance News) - Blue chips continued their strong start to the year on Tuesday with the FTSE 100 hitting a new record led by gains in retailer Next and drug stocks, GSK and AstraZeneca.
The FTSE 100 index closed up 118.16 points, 1.2%, at 10,122.73, a record closing peak. It had earlier set a new intra-day best of 10,158.41.
The FTSE 250 index ended up 197.96 points, 0.9%, at 22,791.89, and the AIM All-Share index closed up 4.65 points, 0.6%, at 779.50.
The Cboe UK 100 was up 1.3% at 1,016.40, the Cboe UK 250 was 1.0% higher at 19,839.55, and the Cboe Small Companies was up 0.1% at 17,979.69.
Next, up 5.0%, impressed the City with strong Christmas sales, led by UK online and its growing international business, while guidance for the coming financial year was viewed as conservative given the retailer's track record of under-promising and over-delivering.
The Leicester-based clothing and homewear retailer said full-price sales were up 11% in the nine weeks that ended December 27 compared to last year, ahead of guidance for annual growth of 7.0%.
UK sales increased 5.9%, ahead of 4.1% prior guidance, while International sales leapt 38%, materially better than the 24% growth predicted.
UK online sales rose 9.1% in the quarter with retail growth of 1.4%.
As a result, the FTSE 100 listing raised guidance for financial 2026 pretax profit by GBP15 million to GBP1.15 billion. This would be growth of 14% from GBP1.01 billion in financial 2025.
It is the fifth time Next has increased profit guidance in the current financial year, after upward revisions in trading updates in March, May, July, October last year.
Looking ahead, Next expects pretax profit of GBP1.20 billion in the financial year to January 2027, up 4.5% from the current year, assuming it makes no further acquisitions.
Russ Mould, investment director at AJ Bell, said: "Ultimately, Next is an example of excellence in the retail space. It has levers to pull to achieve growth even if the outlook in the UK remains uncertain, not least acquisitions, and it would not be a surprise if it beat conservative guidance again.
Grocers Tesco and J Sainsbury rose 2.8% and 2.0% respectively after strong sales figures in the latest Worldpanel by Numerator data.
In the four weeks to December 28, the total market grew 3.8% versus 3.4% in the previous four weeks, with grocery price inflation declining slightly to 4.3% from 4.7%.
Ocado Retail, a joint venture of Ocado and Marks & Spencer, was the fastest growing UK grocer, with sales increasing by 15% over the 12 weeks to December 28 compared to the same period a year ago, and accounting for 2.1% of the market, according to the report.
Borja Olcese at JPMorgan noted: "Market polarisation continued, with Sainsbury emerging amongst the winners and Tesco still comfortably outperforming Asda and Morrison."
Total till roll growth at Tesco rose 4.9% compared to 3.8% in November, and accelerated at Sainsbury to 5.8% from 5.0%.
It was not all good news for retailers however.
JD Sports Fashion fell 4.4% as Bank of America downgraded it to 'neutral' from 'buy' on fears that the downturn in sports retail may continue.
BofA said the down cycle in sports retailing shows no sign of abating, with an expected 2% organic sales decline in the fourth quarter of 2025, and with no turning point in sight.
The broker pointed out the current down cycle, which usually last for 1 to 2 years, will enter its fourth year in April.
BofA also downgraded adidas to 'underperform' from 'buy' sending shares 4.0% lower in Frankfurt.
Meanwhile, data from Barclays showed UK consumer spending fell 1.1% year-on-year in the four weeks to December 26.
"Pubs, fast food and online grocery were the only tracked categories to increase," the report from Barclays showed.
"In contrast, all other tracked categories have seen a decrease in spend, with discount stores and department stores exhibiting sustained softness," Barclays added.
Perhaps reflecting this, shares in B&M European Value Retail fell 2.5%.
Economic data showed growth in the UK service sector improved slightly in December.
The S&P Global UK services PMI business activity index edged higher to 51.4 points in December from 51.3 in November, but underperformed against the flash reading of 52.1.
The pound was quoted at USD1.3500 at the time of the London equities close on Tuesday, down from USD1.3516 on Monday.
The euro was lower at USD1.1689 from USD1.1713. Against the yen, the dollar was trading at JPY156.67, up from JPY156.41.
In European equities on Tuesday, the CAC 40 in Paris closed up 0.3% and the DAX 40 ended 0.1% higher in Frankfurt.
Stocks in New York were higher at the time of the London close on Tuesday.
The Dow Jones Industrial Average was up 0.4%, the S&P 500 was 0.2% higher and the Nasdaq Composite edged up 0.1%.
The yield on the US 10-year Treasury was quoted at 4.20% on Tuesday, widened from 4.17% on Monday. The yield on the US 30-year Treasury was at 4.88%, stretched from 4.86%.
Back in London, Auto Trader fell 2.0% as Jefferies downgraded to 'buy' from 'hold, but Diageo pushed up 0.6% as RBC Capital Markets upgraded to 'outperform' from 'sector perform'.
Elsewhere, an upgrade from Morgan Stanley to 'overweight' gave pest control specialist Rentokil Initial a boost, rising 3.4%.
"We see improving organic momentum in North America pest control through 2026 to drive a re-rating, and we now see scope for significant value to be unlocked over the medium term," analysts at Morgan Stanley said.
The same broker downgraded DCC, down 0.3%, to 'equal weight', seeing "few reasons to be positive into 2026 and limited catalysts for re-rating as the group transitions towards a pure-play energy business."
Pharmaceuticals stocks GSK and AstraZeneca were in favour, up 4.3% and 4.9% respectively, supported by positive news for two treatments in their drug pipelines.
GSK said depemokimab, sold under the brand name Exdensur, has been approved by Japan's Ministry of Health, Labour and Welfare for severe asthma and chronic rhinosinusitis with nasal polyps.
While Cambridge-based AstraZeneca said a Saphnelo self-administration Thlip-SC trial demonstrated statistically significant and clinically meaningful reduction in systemic lupus erythematosus disease activity.
Elsewhere, Ocado jumped 12%, supported by the positive Worldpanel data, and as JPMorgan placed it on 'positive catalyst watch' ahead of full-year results.
JPM thinks clarity on Ocado's relationship with Kroger, balance sheet progress and upside from international markets will support the stock.
Saga rose 6.4% as investor Kelso Group bought 400,000 shares in the provider of products and services for people over 50.
Kelso said it believes Sage is undervalued.
"Despite a strong share price in 2025, we believe there is significant upside from here when compared to peers," said the investor.
Kelso noted that the potential for Saga's inclusion into the FTSE 250 index as the share price improves, and the "likely" resulting demand from index funds.
Brent oil traded at USD61.59 a barrel at the time of the London equities close on Tuesday, down slightly from USD61.63 late Monday.
Gold was higher at USD4,485.16 an ounce at Tuesday's close, against USD4,441.79 on Monday.
The biggest risers on the FTSE 100 were Fresnillo, up 182.00 pence at 3,678.00p, Next, up 675.00p at 14,265.00p, AstraZeneca, up 654.00p at 14,038.00p, Burberry, up 60.00 pence at 1,360.00p and GSK, up 79.00p at 1,899.50p.
The biggest fallers on the FTSE 100 were JD Sports Fashion, down 3.84p at 83.56p, Barratt Redrow, down 10.60p at 372.70p, Pershing Square Holdings, down 120.00p at 4,656.00p, Auto Trader, down 11.80p at 573.00p and Berkeley Group, down 78.00p at 3,902.00p.
Wednesday's local corporate calendar has a trading statement from retailer Topps Tiles.
Wednesday's global economic calendar has a CPI print from Australia overnight, eurozone inflation figures, and a raft of construction PMIs.
In the US, the ISM services PMI will be published, along with ADP unemployment data and the JOLTS job vacancies report.
By Jeremy Cutler, Alliance News reporter
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NextTescoSainsbury'sSagaKelso Grp HldgGlaxosmithklineAstrazenecaJD SportsOcadoAuto TraderRentokil InitialB&MDCCBurberryBarratt RedrowBerkeley GroupFresnilloPershing Square Holdings