29th Oct 2014 10:35
LONDON (Alliance News) - UK indices have made strong gains Wednesday morning ahead of the US Federal Reserve decision after the close of trading
But Next and other clothing retailers are providing a drag on indices after the FTSE 100 company issued a profit warning, blaming the weather.
"You could be forgiven for thinking that the Fed is not about to end QE today. The reaction in markets has not exactly been what many predicted, with investors apparently sanguine about the prospect of life without regular bond purchases by the US central bank," says IG analyst Brenda Kelly. "It is the commitment to low interest rates that is maintaining calm, and expectations are for a doveish Fed decision that will assuage fears about a premature rate hike."
The FTSE 100 is trading up 0.7% at 6,444.30, the FTSE 250 is up 0.6% at 15,207.40, and the AIM All-Share is up 0.3% at 714.37.
In Europe, the French CAC 40 is up 0.3% and the German DAX is up 0.8%.
UK fashion retailer Next is one of the biggest FTSE 100 fallers, declining 0.9%. The company lowered its full-year earnings forecasts, blaming lower sales as a warm autumn in the UK has caused customers to delayed purchases of winter clothing. The news hit the sector as a whole, as analysts expect other clothing retailers to be similarly affected.
Next said it now expects sales growth of 6% to 8% for the year to January 2015, down from its previous growth forecast of between 7% and 10%, and cut its full-year pretax profit estimate to between GBP750 million and GBP790 million, representing annual growth of between 8% and 14%.
"Lower than anticipated full-price sales mean growth forecasts for peak are lowered, and we suspect this represents a risk across the industry of a highly promotional run-in to peak," Investec analyst Alistair Davies said in a commentary following the company statement.
Marks & Spencer also was one of the worst performing stocks in the blue-chip index, down 0.6%. On the FTSE 250, shares in SuperGroup and JD Sports Fashion were down 3.6% and 1.1%, respectively.
Standard Life is another under-performing stock, falling 0.8% after it said the pace of its near-term growth may be hit by difficult investment conditions.
"Although investment markets are unsettled and may affect the near-term pace of asset and revenue growth, we are very well placed for the future. We have the products, experience and proven investment performance to help our customers and clients in all of our markets to save and invest, so that they can look forward to their financial futures with confidence," Chief Executive David Nish said in a statement.
Miners are again providing much of the support for UK indices, as the metal prices continue to gain.
"Nickel and copper prices continue their recent advance on the back of speculation that lower consumer prices will boost spending while investors re-focus on supply/demand fundamentals. While sentiment towards copper has been bearish recently, market fundamentals may not be as weak as predicted," says Metals & Mining analyst at VSA Capital Sheldon Modeland.
The FTSE 350 mining sector index has risen 1.1%, while Glencore, up 1.8%, is amongst the top gainers in the FTSE 100.
UK mortgage approvals declined to the lowest level since July 2013, according to a Bank of England report. The number of mortgages approved for house purchases decreased to 61,267 in September from 64,054 in August, missing expectations of a fall to 62,000.
Total lending to individuals increased by GBP2.7 billion, smaller than last month's GBP3.2 billion increase. Within this, secured lending rose GBP1.8 billion versus GBP2.2 billion growth a month ago. Similarly, consumer credit increased by GBP0.9 billion after rising GBP1 billion in August.
Despite the figures, housebuilder and construction material stocks are generally higher.
The rest of the economic calendar on Wednesday is quiet, with the large exception of the outcome of the Fed's meeting at 1800 GMT. US MBA mortgage applications for the week ending October 24 will be at 1100 GMT and US EIA crude oil stocks for the same period will be at 1430 GMT.
Futures indicate Wall Street for a mixed opening with the DJIA shown to open up 0.1%, the S&P 500 pointed flat, and the Nasdaq Composite indicated down 0.3%.
By Neil Thakrar; [email protected]
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SuperGroupMarks & SpencerNextGlencoreJD SportsSL..L