FTSE 100 and mid-caps scale fresh records as global rally roars on

January 05
21:06 2018

By Helen Reid

LONDON (Reuters) – Britain’s main stock index and the mid-cap benchmark hit new peaks on Friday, lifted by a wave of gains across equities worldwide, while a sharp fall in UK car sales hit some motor dealers and insurance stocks.

The FTSE 100 (.FTSE) rose 0.2 percent to hit a record of 7,909 points in early deals, boosted by miners, utilities and consumer staples stocks. Mid-caps in the FTSE 250 index (.FTMC) also touched a new record, up 0.1 percent.

The blue-chip index was on track for its smallest weekly gains in five weeks, though, as the British market lagged bigger moves in European stocks after impressive economic data for the euro zone.

“The UK stock market and UK economy are quite starkly different,” said Edward Park, investment director at Brooks Macdonald, adding that he continued to expect lower equity returns from the Britain than European and U.S. stocks.

Analysts have, however, begun turning more optimistic on FTSE 100 companies’ earnings, revising up their estimates in the past two weeks as a commodities rally pushed the index higher.

Glencore (GLEN.L), BHP Billiton (BLT.L), and Anglo American (AAL.L) delivered the strongest boost to the FTSE as metals prices held on to their gains after a stellar rally.

Centrica (CNA.L) and United Utilities (UU.L) led the leaderboard after Credit Suisse upgraded both stocks, revising up its view on the sector.

Analysts at the Swiss bank said the worst case for UK domestic energy suppliers was now priced in, and the stocks carried large risk discounts.

Motor insurers were the main laggards after car sales data showed the sharpest fall in new car registrations since 2009.

Admiral (ADML.L) sank 4.7 percent to the bottom of the FTSE, while Direct Line (DLGD.L) fell 0.9 percent.

Admiral was doubly hit by both the car sales data and a downgrade to “underweight” from JP Morgan.

A Mediobanca analyst said Admiral was the most exposed to the UK car market, with nearly 100 percent of profits made domestically, while Direct Line also drew nearly 50 percent of its premiums from personal motor insurance.

Some small-caps were also hit by the weaker sales data, with auto retailer Pendragon (PDG.L) down 3.8 percent and dealership chain Lookers (LOOK.L) dropping 3.2 percent.

Mid-cap stocks were helped to their record by strong industrials and tech shares. The more domestically focused stocks were shunned by investors after Brexit but some were being tempted back by lower valuations.

“A lot of the domestic UK market has started to price in a weak economic outlook. We find some interest there to be honest,” said John Surplice, pan-European fund manager at Invesco Perpetual.

“We have reflected that in our portfolio and got a bit more domestic UK exposure – but as a responsible pan-European investor you see the merits of some domestic UK stocks but you don’t want to go overboard on it,” he added.

(Reporting by Helen Reid; Editing by Alison Williams)

Related Articles