London open: Stocks edge up as Next, GSK boost outlooks

London stocks edged up in early trade on Wednesday, helped along by well-received updates from the likes of Next and GSK, as investors awaited the latest policy announcement from the US Federal Reserve.

At 0830 GMT, the FTSE 100 was up 0.3% at 7,340.05.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "All eyes will be on the Fed later, as policymakers decide on interest rate policy, and while the pause button is expected to remain pressed, the possibility of another rate hike is set to remain on the table. Fed Chair Jay Powell’s comments will be closely scrutinised for indications of just how long rates are set to stay higher, given the resilience of the US economy.

"Equities have rallied in the last few sessions, but renewed wariness is set to slink in on Wall Street ahead of the rates decision."

Market participants were digesting the latest data out of China, which showed that the manufacturing industry contracted in October for the first time in three months.

The Caixin manufacturing PMI fell to 49.5 last month from 50.6 in September, surprising analysts who had expected a pick-up to 50.8.

Readings above 50 indicate expansion, while readings below signal a contraction in activity. This was the first contraction recorded since July.

Manufacturing production saw a renewed fall, with companies linking cuts in output to muted sales, particularly from abroad, Caixin said. Purchasing activity also fell as firms made greater usage of current stocks to help control costs. Manufacturing employment also continued its recent decline, with the employment sub-index falling to its lowest since May.

Meanwhile, input cost inflation increased to a nine-month high, with firms citing higher prices for raw materials and oil.

"Overall, manufacturers were not in high spirits in October. Supply, employment and external demand all fell, while domestic demand expanded at a slower pace. Costs and output prices both rose, purchases fell, and inventories of finished goods increased. Business optimism continued to wane," said Caixin economist Wang Zhe.

"Many of China’s economic data for the third quarter exceeded market expectations. Consumption, especially in the services sector, is resilient. The economy has showed signs of bottoming out, but the foundation of recovery is not solid. Demand is weak, many internal and external uncertainties remain, and expectations are still relatively weak."

On home shores, the latest survey from Nationwide showed that house prices unexpectedly rose in October amid "constrained" supply.

House prices ticked up 0.9% on the month following a 0.1% increase in September, beating expectations for a 0.4% decline.

On the year, house prices were down 3.3% in October following a 5.3% slump in September.

The average price of a home now stands at £259,423.

Nationwide chief economist Robert Gardner said that nevertheless, housing market activity has remained "extremely weak", with just 43,300 mortgages approved for house purchase in September, around 30% below the monthly average prevailing in 2019.

"This is not surprising as affordability remains stretched. Market interest rates, which underpin mortgage pricing, have moderated somewhat but they are still well above the lows prevailing in 2021," he said.

"The uptick in house prices in October most likely reflects the fact that the supply of properties on the market is constrained. There is little sign of forced selling, which would exert downward pressure on prices, as labour market conditions are solid and mortgage arrears are at historically low levels."

In equity markets, Next was the standout gainer on the FTSE 100 after the retailer boosted its full-year guidance as third-quarter trading beat internal expectations. The fashion retailer said full-price sales in the three months to 28 October rose 4% year-on-year, £23m ahead of earlier guidance for 2% growth.

Next increased its full-year guidance for pre-tax profits by £10m to £885m. It also upped its forecast for full-year sales, which are now expected to be 3.1% stronger at £4.74bn on the assumption full-price sales remain 2% higher for the rest of the year. Next previously forecast full-year sales growth of 2.6%.

Marks & Spencer also gained.

GSK rallied after the drug maker lifted its full-year profit outlook. It now expects turnover to increase by 12% to 13%, up from previous guidance of 8% to 10%, and adjusted operating profit growth of 13% to 15%, up from 11% to 13%. Adjusted earnings per share are set to grow between 17% and 20%, versus previous guidance of 14% to 17%.

On the downside, Aston Martin Lagonda slumped as it posted a wider-than-expected third-quarter loss and downgraded its volume outlook for the DB12 model due to ramp-up delays.

Mining engineering company Weir was also in the red as it reiterated its guidance for "strong growth" this year despite orders slipping in the third quarter.

BP was knocked lower by a downgrade to ‘underweight’ from ‘neutral’ at JPMorgan.

Market Movers

FTSE 100 (UKX) 7,340.05 0.25%
FTSE 250 (MCX) 17,094.49 0.07%
techMARK (TASX) 4,028.97 0.25%

FTSE 100 - Risers

Next (NXT) 7,086.00p 2.93%
Smurfit Kappa Group (CDI) (SKG) 2,738.00p 2.01%
Marks & Spencer Group (MKS) 220.40p 1.66%
Smith (DS) (SMDS) 289.90p 1.65%
Kingfisher (KGF) 213.00p 1.53%
Centrica (CNA) 159.60p 1.46%
GSK (GSK) 1,476.00p 1.28%
Mondi (MNDI) 1,345.00p 1.20%
Legal & General Group (LGEN) 213.80p 1.14%
Prudential (PRU) 867.40p 1.12%

FTSE 100 - Fallers

Weir Group (WEIR) 1,653.50p -3.13%
SEGRO (SGRO) 692.80p -2.81%
Endeavour Mining (EDV) 1,668.00p -1.88%
Ocado Group (OCDO) 458.10p -1.55%
BP (BP.) 497.40p -1.03%
Fresnillo (FRES) 549.00p -0.87%
Coca-Cola HBC AG (CDI) (CCH) 2,115.00p -0.80%
Glencore (GLEN) 431.70p -0.79%
International Consolidated Airlines Group SA (CDI) (IAG) 143.20p -0.66%
Sage Group (SGE) 964.40p -0.64%

FTSE 250 - Risers

Dr. Martens (DOCS) 121.00p 3.95%
Me Group International (MEGP) 145.00p 3.42%
CAB Payments Holdings (CABP) 63.10p 3.10%
Hiscox Limited (DI) (HSX) 960.50p 2.40%
PZ Cussons (PZC) 136.80p 2.24%
Trainline (TRN) 265.80p 2.07%
Wood Group (John) (WG.) 144.30p 1.69%
Ceres Power Holdings (CWR) 201.20p 1.62%
Direct Line Insurance Group (DLG) 153.55p 1.49%
Games Workshop Group (GAW) 10,020.00p 1.47%

FTSE 250 - Fallers

Aston Martin Lagonda Global Holdings (AML) 206.00p -5.85%
Future (FUTR) 850.00p -3.90%
Great Portland Estates (GPE) 375.20p -3.79%
Liontrust Asset Management (LIO) 542.00p -3.04%
Drax Group (DRX) 412.00p -2.51%
Bridgepoint Group (Reg S) (BPT) 177.00p -2.48%
Senior (SNR) 152.60p -2.43%
LXI Reit (LXI) 84.10p -1.92%
Mitchells & Butlers (MAB) 204.20p -1.54%
Grafton Group Ut (CDI) (GFTU) 761.20p -1.28%