London close: Stocks rise as US jobless claims slow

London markets showed mixed performance on Thursday as investors digested the latest UK services and mortgage data and a fall in jobless claims across the pond.

The FTSE 100 edged up 0.53% to reach 7,723.07 points, while the FTSE 250 posted a more modest gain of 0.24%, closing at 19,372.05 points.

In currency markets, sterling was last up 0.24% on the dollar, trading at $1.2695, while it dipped 0.09% against the euro to change hands at €1.1585.

"After finishing 2023 on a strong note, and then seeing a slow start to the first trading week of 2024, the FTSE 100 has managed to post its first positive day this year, with the main gains being driven by a resilient performance from defensives as well as the energy sector," said CMC Markets chief market analyst Michael Hewson.

"The main story on the UK blue chip index today has been a tale of two retailers, with Next shares pushing up to new record highs after upgrading its profits guidance for the fifth time in the last 12 months.

"JD Sports, on the other hand, has seen its shares plunge completely wiping out the 31% gain it saw in 2023 with the shares sliding to 13-month lows after warning that the milder weather in the last quarter meant that organic revenue growth would be weaker than expected at 6%."

UK services sector grows, mortgage approvals unexpectedly rise

In economic news, the UK service sector displayed robust growth in December, hitting a six-month high.

The S&P Global/CIPS services PMI business activity index rose to 53.4, surpassing the prior month's figure of 50.9 and exceeding the flash reading of 52.7.

At the same time, the final composite PMI, which measures both the service and manufacturing sectors, climbed to 52.1 in December, marking the highest level since last June and surpassing the flash estimate of 51.7.

"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," said Tim Moore, economics director at S&P Global Market Intelligence.

"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."

Meanwhile, the Bank of England reported an unexpected increase in UK mortgage approvals for November, reaching their highest level in five months.

Net approvals for house purchases totalled 50,100, surpassing the consensus estimate of 48,500.

The net remortgaging approvals number also rose, from 24,000 to 27,000.

Consumer credit borrowing saw a significant surge in November, reaching its highest level in nearly seven years.

With consumers taking on more credit card debt ahead of the festive season amidst a cost-of-living crisis, net consumer credit borrowing rose to £2bn, up from £1.4bn in October.

On the continent, flash estimates for Germany's consumer price index (CPI) in December revealed a notable uptick in annual inflation, reaching 3.7%, slightly below the consensus estimate of 3.8%.

The increase was broadly in line with expectations after a prior year plunge in energy prices.

Across the Atlantic, jobless claims in the US saw a decline, with the Labor Department reporting the lowest count since October.

In the week ended 30 December, jobless claims fell by 18,000 to 202,000, well below market expectations of 216,000.

Continuing claims also dropped by 31,000 to 1.88 million, potentially indicating improved job prospects.

Private sector employment in the US also exceeded expectations, with ADP reporting an increase of 164,000 jobs in December, surpassing the anticipated 115,000 gain.

Finally on data, China's services sector showed strong growth in December, outperforming expectations.

The Caixin services PMI rose to 52.9, the highest since July, with overall new orders at 53.7, the highest since May, and the index for new export orders at 52.2.

Next jumps, JD Sports tumbles on diverging updates

On London's equity markets, fashion retailer Next jumped 5.79% after it revised its annual guidance following better-than-expected full-price sales during November and December.

Over the nine weeks ended 30 December, full-price sales increased by 5.7% year-on-year, surpassing previous guidance of a 2% rise.

As a result, annual pre-tax profit saw a £20m increase to £905m, with £17m attributed to the sales beat and £3m from an upgraded forecast for full-price sales in January.

"In all, Next has shown its mettle once more in a famously competitive environment, in which it is seen as something of a linchpin," said Richard Hunter, head of markets at Interactive Investor.

"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."

Hunter said the warm initial price reaction to the update could initiate some upgrades to a market consensus which had yet to break out of its range for a sustained period.

"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."

Elsewhere, energy giants BP and Shell saw gains of 1.28% and 0.66%, respectively, as oil prices rose amid escalating tensions in the Middle East.

On the downside, JD Sports Fashion tumbled 23% following a profit warning after second-half trading fell short of expectations, primarily due to milder autumn weather and increased discounting during the peak holiday shopping season.

The heightened promotional activity during this period led to a slight reduction in full-year gross margins, prompting JD Sports to lower its adjusted pre-tax profit guidance to a range of £915m to £935m, down from the £1.04bn forecast at the half-year.

Sports Direct owner Frasers Group was also on the back foot, falling 3.62% by the close.

Tullow Oil joined the downward trend with a decrease of 3.71% following a downgrade from 'hold' to 'underperform' by Jefferies.

Elsewhere, Big Yellow Group was down 2.83%, Dr Martens lost 1.2%, and Workspace Group was off 2.17%, as they all traded without entitlement to dividends.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,723.07 0.53%
FTSE 250 (MCX) 19,372.05 0.24%
techMARK (TASX) 4,294.37 0.68%

FTSE 100 - Risers

Next (NXT) 8,550.00p 5.79%
Beazley (BEZ) 549.00p 4.27%
Schroders (SDR) 431.70p 2.25%
Hikma Pharmaceuticals (HIK) 1,850.50p 2.01%
BAE Systems (BA.) 1,155.50p 1.90%
International Consolidated Airlines Group SA (CDI) (IAG) 153.30p 1.86%
Berkeley Group Holdings (The) (BKG) 4,775.00p 1.86%
Intertek Group (ITRK) 4,276.00p 1.83%
WPP (WPP) 742.20p 1.75%
Sainsbury (J) (SBRY) 308.20p 1.62%

FTSE 100 - Fallers

JD Sports Fashion (JD.) 119.70p -23.00%
Croda International (CRDA) 4,667.00p -4.40%
Frasers Group (FRAS) 840.00p -3.56%
Flutter Entertainment (CDI) (FLTR) 13,365.00p -2.52%
Fresnillo (FRES) 543.00p -1.84%
Endeavour Mining (EDV) 1,694.00p -1.28%
Entain (ENT) 969.00p -1.20%
BT Group (BT.A) 121.60p -1.10%
F&C Investment Trust (FCIT) 938.00p -1.06%
Kingfisher (KGF) 233.00p -0.77%

FTSE 250 - Risers

Future (FUTR) 812.50p 3.70%
Diversified Energy Company (DEC) 1,220.00p 3.70%
Aston Martin Lagonda Global Holdings (AML) 214.40p 3.47%
easyJet (EZJ) 497.20p 3.22%
IntegraFin Holding (IHP) 301.80p 3.00%
Bridgepoint Group (Reg S) (BPT) 269.60p 2.90%
C&C Group (CDI) (CCR) 149.60p 2.89%
4Imprint Group (FOUR) 4,530.00p 2.60%
Tritax Eurobox (GBP) (EBOX) 60.20p 2.56%
Hargreaves Lansdown (HL.) 727.00p 2.54%

FTSE 250 - Fallers

Tullow Oil (TLW) 37.00p -4.64%
Baltic Classifieds Group (BCG) 228.50p -4.19%
SDCL Energy Efficiency Income Trust (SEIT) 62.10p -3.72%
Wood Group (John) (WG.) 158.40p -3.65%
Hochschild Mining (HOC) 97.65p -3.41%
Watches of Switzerland Group (WOSG) 636.00p -3.27%
Big Yellow Group (BYG) 1,164.00p -3.08%
Helios Towers (HTWS) 85.60p -2.89%
Syncona Limited NPV (SYNC) 119.60p -2.76%
Ferrexpo (FXPO) 82.00p -2.61%