London midday: FTSE pares gains amid diverging fortunes for Next, JD Sports

Sharecast - The FTSE 100 was steady at 7,684.18.

Investors were mulling the latest minutes from the Federal Reserve released overnight. They showed that officials saw rate cuts as likely this year but didn't give any details on when the central bank might start to loosen monetary policy.

Market participants were also digesting the latest data out of China, where the Caixin services PMI rose to 52.9 in December from 51.5 in November. This was above consensus expectations of 51.6 and marked the highest level since July. A reading above 50.0 indicates expansion, while a reading below signals contraction.

Overall new orders rose 2.5 points to 53.7 - the highest since May - while the index for new export orders was up 0.7 points to 52.2.

On home shores, a survey out earlier showed that activity in the UK service sector rose at the fastest pace in six months in December.

The S&P Global/CIPS services PMI business activity index increased to 53.4 from 50.9 in December, coming in above the flash reading of 52.7.

Meanwhile, the final composite PMI - which measures activity in both the service and manufacturing sector - came in at 52.1 in December, up from 50.7 the month before. This also marked the highest level since last June and was above the flash estimate of 51.7.

Tim Moore, economics director at S&P Global Market Intelligence, said: "December data indicated that the UK service sector ended last year on a high, with business activity growth accelerating to its fastest for six months as the turnaround in order books gained momentum. The recovery in client demand was attributed to hopes of lower borrowing costs and an improving global economic backdrop in 2024. However, many firms continued to cite challenging underlying business conditions due to the stagnating UK economy and strong pressure on margins from rising labour costs.

"Business activity expectations for the year ahead are now the most upbeat since last May, supported by signs of a rebound in clients' appetite to spend. Staff hiring was the main weak spot in December, with hiring freezes yet to be lifted as service providers sought to maintain a tight grip on headcount."

Separate data released by the Bank of England showed that mortgage approvals rose more than expected in November, to their highest in five months as interest rate projections began to fall.

Net approvals for house purchases, a key indicator of future borrowing, totalled 50,100 in November, up from 47,900 in October and the highest level since June. This was ahead of the consensus estimate of 48,500.

Meanwhile, net approvals for remortgaging, which only include remortgaging with a different lender, increased from 24,000 to 27,000.

In equity markets, fashion retailer Next (LON:NXT) rallied as it lifted annual guidance after better-than-expected full-price sales during November and December. Full-price sales in the nine weeks to December 30 rose 5.7% year-on-year, £38m better than previous guidance of a 2% rise.

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Annual pre-tax profit was lifted £20m to £905m. Of that, £17m came from the sales beat to date and £3m from an upgraded forecast for full-price sales in January.

Richard Hunter, head of markets at Interactive Investor, said: "In all, Next has shown its mettle once more in a famously competitive environment, in which it is seen as something of a linchpin. Its share price performance has also defied the odds which tend to follow the retail sector, having risen by 35% over the last year, as compared to a gain of just 1.3% for the wider FTSE 100.

"The warm initial price reaction to the update could initiate some upgrades to a market consensus which has yet to break out of its range for a sustained period of time. Indeed, the general view of the shares as a hold, albeit a strong one, has tended to underestimate the strides which the company has been making."

BP (LON:BP) and Shell (LON:RDSa) gushed higher as oil prices rose amid growing tensions in the Middle East.

Going the other way, JD Sports (LON:JD) tumbled as it delivered a profit warning after second-half trading missed expectations due to milder autumn weather and heavier discounting over the peak holiday shopping season.

The company said the "elevated level of promotional activity" during the peak trading period meant that full-year gross margins would be slightly lower than last year, leading it to cut adjusted pre-tax profit guidance to between £915m and £935m, from £1.04bn at the half-year stage.

Sports Direct (LON:FRAS) owner Frasers Group also lost ground.

Tullow Oil (LON:TLW) was on the back foot after a downgrade to ‘underperform’ from ‘hold’ at Jefferies.

Big Yellow, Dr Martens (LON:DOCS) and Workspace (LON:WKP) were in the red as they traded without entitlement to the dividend.

Market Movers

FTSE 100 (UKX) 7,684.18 0.02%

FTSE 250 (MCX) 19,337.77 0.06%

techMARK (TASX) 4,266.76 0.03%

FTSE 100 - Risers

Next (NXT) 8,438.00p 4.40%

Beazley (BEZ) 542.50p 3.04%

BP (BP.) 479.90p 1.68%

Rentokil Initial (LON:RTO) 417.20p 1.48%

Anglo American (JO:AGLJ) (AAL) 1,891.40p 1.20%

BAE Systems (LON:BAES) (BA.) 1,147.00p 1.15%

Shell (SHEL) 2,615.50p 0.87%

International Consolidated Airlines Group (LON:ICAG) SA (CDI) (IAG) 151.80p 0.86%

WPP (LON:WPP) 735.60p 0.85%

Rolls-Royce Holdings (LON:RR.) 297.10p 0.78%

FTSE 100 - Fallers

JD Sports Fashion (JD.) 119.70p -23.00%

Frasers Group (FRAS) 835.00p -4.13%

Croda International (CRDA) 4,698.00p -3.77%

Flutter Entertainment (CDI) (FLTR) 13,400.00p -2.26%

F&C Investment Trust (FCIT) 931.00p -1.69%

Experian (EXPN) 3,013.00p -1.44%

BT Group (LON:BT.A) 121.20p -1.42%

Halma (LON:HLMA) 2,127.00p -1.07%

Diploma (LON:DPLM) 3,322.00p -0.95%

Scottish Mortgage Inv Trust (SMT) 757.20p -0.94%

FTSE 250 - Risers

W.A.G Payment Solutions (WPS) 92.00p 4.55%

Aston Martin Lagonda Global Holdings (AML) 215.00p 3.76%

Diversified Energy Company (DEC) 1,217.00p 3.44%

Future (FUTR (LON:FUTR)) 808.50p 3.19%

easyJet (LON:EZJ) 491.30p 1.99%

Bridgepoint Group (Reg S) (BPT) 267.00p 1.91%

Redrow (LON:RDW) 603.00p 1.52%

Sequoia Economic Infrastructure Income Fund Limited (SEQI) 85.40p 1.43%

Hargreaves Lansdown (LON:HRGV) (HL.) 719.00p 1.41%

Smithson Investment Trust (SSON) 1,379.00p 1.40%

FTSE 250 - Fallers

Tullow Oil (TLW) 37.44p -3.51%

Syncona Limited NPV (SYNC) 118.80p -3.41%

Baltic Classifieds Group (BCG) 231.50p -2.94%

Ferrexpo (LON:FXPO) 82.10p -2.49%

Big Yellow Group (LON:BYG) 1,175.00p -2.16%

Workspace Group (WKP) 542.50p -1.90%

Helios Towers (HTWS) 86.55p -1.82%

Dr. Martens (DOCS) 85.60p -1.78%

Man Group (EMG) 226.50p -1.78%

Games Workshop Group (GAW (LON:GAW)) 9,455.00p -1.77%

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