London midday: Stocks extend gains as AB Foods rallies on update

London stocks had extended gains by midday on Tuesday, with Primark owner AB Foods on the rise after an upbeat trading statement, as investors mulled the latest UK jobs data.

The FTSE 100 was up 0.6% at 7,539.01.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Sentiment is erring on the positive, helped by an easing of property woes in China, with the FTSE 100 higher in early trade.

"Debt-laden giant Country Garden has won creditor approval to extend payments on some bonds adding to a slightly more optimistic take on China’s economic prospects. Brent Crude has inched up a little, ahead of key market insight reports later, still supported by extended supply cuts.

"Wage growth is still hot in Britain and the temperature isn’t coming down much, providing little relief for Bank of England policymakers who need more evidence that employers are showing restraint before they’ll feel confident about pressing pause on interest rate hikes."

Figures released earlier by the Office for National Statistics showed that wage growth remained at its highest level in 22 years in July, but the unemployment rate ticked higher.

Average regular earnings growth was unchanged at 7.8% in the three months to July, above consumer price inflation of 6.8%, while the unemployment rate nudged up to 4.3% from 4.2%.

Growth in average total pay - which includes bonuses - was 8.5% in July, up from 8.2%, as one-off payments to NHS workers and civil servants after deals to end strike action provided a boost.

The number of job vacancies in the three months to August was 989,000, down 64,000 from the previous quarter, the ONS said.

Director of economic statistics Darren Morgan said: "Earnings in cash terms continue to increase, at a record rate outside the pandemic-affected period.

"Coupled with lower inflation, this means people’s real pay is no longer falling.

"Unemployment continues to increase in the latest three months. Correspondingly, employment is down, driven by falls among men and the self-employed.

"The proportion of people neither working or looking for a job is slightly up, with more students, as well as the long-term sick reaching yet another record."

Elsewhere, the latest data from Kantar showed that grocery price inflation fell to its lowest level in a year at 12.2% for the four weeks to 3 September, but 19 out of 20 shoppers are worried about the cost of their shopping.

Fraser McKevitt, head of retail and consumer insight at Kantar, said: "Grocery price inflation is down for the sixth month in a row but 12.2% won’t be a number to celebrate for many households. Our data shows that 95% of consumers are still worried about the impact of rising grocery prices, matched only by their concern about energy bills.

"After a full year of double digit grocery inflation, it’s no surprise that just under a quarter of the population consider themselves to be struggling financially - although this is a very slight drop compared to May."

In equity markets, Associated British Foods surged as it lifted annual guidance again, boosted by a recovery at its Primark retail chain and a strong performance from food operations.

AB Foods said it now expected full-year adjusted operating profit to be "slightly better" than previous guidance, when it said earnings would be "moderately ahead" of 2021/22's £1.43bn.

Primark like-for-like sales growth for the financial year is now tipped to be around 9%, with like-for-like sales likely to be around 7% in the second half. For the financial year as a whole, sales are forecast to be around 15% ahead year on year, it added.

JTC jumped after the provider of fund administration services said it expects to deliver full-year results ahead of current market expectations.

On the downside, Smurfit Kappa tumbled after the company said it had agreed to merge with US rival WestRock in a deal that will create a $20bn packaging giant.

Under the terms of the transaction, shareholders of US-based WestRock will receive one new Smurfit WestRock share and $5 in cash. This represents a total consideration equivalent to $43.51 per share, based on the Smurfit closing price on Monday.

Aerospace, defence and security tech group Chemring was under the cosh after saying it remains on track to hit forecasts this year, but only as long as the US Department of Defense signs off a £25m order.

Market Movers

FTSE 100 (UKX) 7,539.01 0.56%
FTSE 250 (MCX) 18,529.65 0.04%
techMARK (TASX) 4,351.70 0.57%

FTSE 100 - Risers

Associated British Foods (ABF) 2,153.00p 7.60%
Vodafone Group (VOD) 77.25p 2.82%
BT Group (BT.A) 116.00p 2.56%
Airtel Africa (AAF) 116.90p 2.45%
Next (NXT) 7,324.00p 2.32%
Fresnillo (FRES) 592.80p 2.21%
JD Sports Fashion (JD.) 142.55p 2.19%
Endeavour Mining (EDV) 1,552.00p 2.11%
Melrose Industries (MRO) 494.90p 1.94%
Sainsbury (J) (SBRY) 274.30p 1.93%

FTSE 100 - Fallers

Smurfit Kappa Group (CDI) (SKG) 2,808.00p -8.47%
Antofagasta (ANTO) 1,481.50p -1.85%
CRH (CDI) (CRH) 4,309.00p -1.37%
Smith (DS) (SMDS) 286.90p -1.24%
Croda International (CRDA) 5,082.00p -1.17%
Mondi (MNDI) 1,291.50p -1.03%
Johnson Matthey (JMAT) 1,730.50p -1.00%
Ashtead Group (AHT) 5,112.00p -0.74%
Severn Trent (SVT) 2,423.00p -0.74%
Persimmon (PSN) 1,030.00p -0.68%

FTSE 250 - Risers

JTC (JTC) 734.00p 8.82%
easyJet (EZJ) 456.30p 3.45%
W.A.G Payment Solutions (WPS) 90.60p 2.95%
Wizz Air Holdings (WIZZ) 1,998.00p 2.23%
Watches of Switzerland Group (WOSG) 611.00p 2.00%
PureTech Health (PRTC) 207.00p 1.97%
Lancashire Holdings Limited (LRE) 599.50p 1.87%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 466.50p 1.86%
Vanquis Banking Group 20 (VANQ) 122.00p 1.67%
Baltic Classifieds Group (BCG) 195.40p 1.56%

FTSE 250 - Fallers

Chemring Group (CHG) 289.00p -5.09%
Babcock International Group (BAB) 380.80p -2.91%
North Atlantic Smaller Companies Inv Trust (NAS) 3,450.00p -2.82%
IWG (IWG) 168.30p -2.21%
Derwent London (DLN) 1,819.00p -2.05%
Molten Ventures (GROW) 242.60p -2.02%
Senior (SNR) 165.80p -1.89%
Diversified Energy Company (DEC) 85.10p -1.79%
Victrex plc (VCT) 1,428.00p -1.72%
Impax Environmental Markets (IEM) 382.50p -1.67%