FTSE steadies as Next slump offsets Morrison rally

People walk through the lobby of the London Stock Exchange in London, Britain August 25, 2015.  REUTERS/Suzanne Plunkett/File photo

Britain’s top equity index steadied near a one-month low on Thursday, with a slump in Next (NXT.L) following poor results offsetting a strong rally in Morrisons (MRW.L) after a rise in its first-half profit for the first time in four years.

The blue-chip FTSE 100 index .FTSE was up 0.06 percent at 6,677.55 points after falling to 6,654.82, coming close to Monday’s one-month low. The index has fallen around 4 percent since early September, but is still up nearly 7 percent so far this year.

British clothing retailer Next fell nearly 5 percent, the worst performer in the FTSE 100 index, after reporting a 1.5 percent fall in its first-half profit and saying that trading since July had been challenging and volatile.

“Even though Next is less prone to the difficulties currently facing the high-end retailers, there are a number of struggles … which the company is confronting with varying degrees of success,” said Richard Hunter, head of research at Wilson King Investment Management.

“The retail business has seen a slump in operating profit, the group overall has suffered due to the increase in markdown sales and the outlook is notably cautious. The wider implications of Brexit, such as higher import costs, have yet to wash through, whilst competition in the sector remains intense.”

However, official figures showed that British retail sales softened only slightly in August after a bumper July, suggesting June’s vote to leave the EU has had little initial impact on shoppers’ willingness to spend.

Next’s results also put pressure on its peer Marks & Spencer (MKS.L), which fell 2.7 percent.

In contrast, Morrisons (MRW.L) surged 7.2 percent after the supermarket reported a rise in first-half profit for the first time in four years and a third straight quarter of underlying sales growth.

Nicholas Hyett, analyst at Hargreaves Lansdown, said Morrisons is not completely out of the woods. “Lower sterling will increase the costs of imported foods, and how far the supermarket is able to pass that increase on to customers remains to be seen.”

Specialist annuities provider JRP Group (JRP.L) was up more than 14 percent. It posted a 12 percent rise in operating profit on a pro-forma basis in the first half, boosted by the integration of a former rival.

“JRP Group … reported an excellent set of interims, which should dispel many, if not all, of the fears in the market over the group’s new business prospects, the strength of its balance sheet and the potential from the merger,” Shore Capital said.

[Source:- Reuters]