London close: FTSE touches 7700 as Wall Street confidence spreads

London stocks took confidence from their US and European counterparts on Thursday afternoon, even though the pound ticked up against the dollar following decent services data, while a profit warning from Debenhams weighed on retail shares.

The FTSE 100 index closed up 24.8 points or 0.32% 7,695.88, having reached a new record intraday high just above 7,700 earlier.

Meanwhile, the pound was down 0.2% against the euro at 1.1223 but up 0.2% versus the greenback at 1.3540 after solid data on the UK's key services sector.

Said analyst Joshua Mahony at IG: "The pound enjoyed yet another day of gains, thanks in no small part to the welcome outperformance of the UK services PMI figure this morning. With the UK services PMI hitting the second highest reading in eight months, there is hope that the sector will drive the pound higher and allow the BoE to raise rates further in 2018 if inflation continues to rise."

The UK purchasing managers' index from IHS Markit/CIPS showed an improved reading of 54.2 in December from the 53.8 a month earlier and better than the 54.0 consensus forecast. However, growth in new services orders fell to a 16-month low and a hiring slowed, to underscore the downside risks to the near-term outlook.

After surveys earlier in the week on the UK's manufacturing and construction sectors indicated continued growth despite both falling short of expectations, the all-sector PMI survey gave a reading for December of 54.9, which was short of the 55.0 consensus and unmoved from the previous month.

Based on historical comparisons, the composite survey suggested the UK economy grew at a quarterly rate of 0.4-0.5% in the fourth quarter, following the third quarter's 0.4% expansion. This would result in growth of around 1.8% for the whole of 2017, down from 1.9% the year before.

UK stocks has been flat until midday but began to gain ground in the afternoon. Helping sentiment in the City was a bullish Wall Street, where the Dow Jones index planted its flat in 25,000 and then looked for the next peak.

"The bullish sentiment in the US seems to be having a similarly optimistic effect upon their European counterparts, with the FTSE 100 managing to move within touching distance of record highs despite a day of gains for the pound," said IG's Mahoney.

"With markets hoping to see Donald Trump move the agenda towards infrastructure spending plans this month, the continued improvements seen in the US economy as evident by today’s ADP outperformance are expected to persist. With markets looking towards tomorrow’s US jobs report as a key driver of market direction, the focus will increasingly be upon the wage numbers as a key driver of monetary policy. As the US jobs market approaches ‘full employment’, the labour demand associated with large infrastructure would no doubt cause wage push inflation, putting further pressure on the Fed to act."

Asian markets had earlier notched a record high as Japanese shares played catch-up, while data out of China earlier showed the services sector grew at its fastest pace in more than three years in December. The Caixin/Markit services purchasing managers' index rose to 53.9 last month from 51.9 in November, marking the best reading since August 2014 and beating expectations of 51.8.

Meanwhile the mood in Europe was lifted as a eurozone survey showed the bloc's economic growth accelerated more than initially estimated in December. The eurozone PMI rose to 58.1 from 57.5 in November, coming in ahead of the flash estimate of 58.0 and marking the highest reading since February 2011.

Elsewhere, the latest survey from mortgage lender Nationwide revealed that UK house price growth slowed in 2017, though was higher than expected in December. Prices across 2017 were up 2.6% on the year, down from the 4.5% annual increase recorded in 2016. London was the weakest region for the first time since 2004, with prices in the capital down 0.5%.

On the corporate front, NMC Health led the FTSE 100 after buying up the outstanding minority stakes in the Fakih fertility clinic and As Salama Hospital for a total of $218m. NMC said it would pay a combination of cash and new shares worth $205m for the 49% of Fakih IVF it does not own.

Whitbread gained after it appointed former ITV and Royal Mail boss Adam Crozier as its new chairman amid recent City chatter about a potential break-up of the Premier Inn and Costa Coffee owner, while Rotork was higher as it appointed Kevin Hostetler as chief executive with effect from 12 March.

Unilever was slightly higher as it confirmed the closure of its 160-year old Colman's Mustard factory in Norwich, while Irn Bru maker AG Barr was up a penny as its iconic Scottish tipple hit the headlines as fans started stockpiling the drink ahead of a planned halving of its sugar content.

Meanwhile, security services company G4S was propelled higher by an upbeat note from Redburn, while Wood Group was lifted by JP Morgan reiterating its 'overweight' stance and telling clients it remained a 'top pick' in the oil field services space for 2018.

In sharp contrast to the upbeat performance after Next's update a day earlier, a profit warning from Debenhams saw retailers dominate on the downside. Sales at the department store group fell and "tactical promotional action" misfired in the crucial festive period, leading to speculation from analysts that the company will need to cut its dividend. Sports Direct, which owns 21% of Debenhams, was down more than 3%, though rumours abounded that boss Mike Ashley might make an opportunistic bid. Fellow retailers Marks & Spencer, Burberry and Next were all in the red.

Medical inhaler specialist Vectura dropped as it said 2017 full year revenue should be in line with expectations, adding that a strong second half delivered closing cash and cash equivalents of around £104m net of £1.4m outflows in respect of the £15m share buyback which started in November.

Hochschild Mining was hit by a downgrade to 'sector perform' from 'outperform' by RBC Capital Markets on valuation grounds.

Market Movers

FTSE 100 (UKX) 7,696.55 0.33%
FTSE 250 (MCX) 20,813.17 0.33%
techMARK (TASX) 3,560.25 0.16%

FTSE 100 - Risers

NMC Health (NMC) 3,074.00p 5.27%
Worldpay Group (WPG) 437.00p 3.36%
G4S (GFS) 274.10p 3.32%
CRH (CRH) 2,744.00p 2.43%
Standard Chartered (STAN) 792.10p 1.88%
Smiths Group (SMIN) 1,527.00p 1.80%
Anglo American (AAL) 1,609.80p 1.74%
Johnson Matthey (JMAT) 3,167.00p 1.60%
Centrica (CNA) 141.87p 1.55%
GKN (GKN) 323.00p 1.48%

FTSE 100 - Fallers

Marks & Spencer Group (MKS) 308.70p -3.68%
British Land Company (BLND) 664.20p -3.18%
Land Securities Group (LAND) 970.90p -2.41%
Hammerson (HMSO) 535.00p -2.19%
Burberry Group (BRBY) 1,756.50p -1.84%
easyJet (EZJ) 1,511.50p -1.31%
Berkeley Group Holdings (The) (BKG) 4,178.00p -1.11%
Just Eat (JE.) 801.40p -1.11%
Next (NXT) 4,754.00p -0.96%
SEGRO (SGRO) 577.80p -0.93%

FTSE 250 - Risers

Capita (CPI) 414.50p 3.96%
Wood Group (John) (WG.) 682.40p 3.58%
Ocado Group (OCDO) 437.20p 3.36%
Hunting (HTG) 625.00p 3.31%
Evraz (EVR) 371.30p 3.14%
Pagegroup (PAGE) 455.00p 2.76%
Cairn Energy (CNE) 224.80p 2.65%
Elementis (ELM) 297.40p 2.62%
Weir Group (WEIR) 2,236.00p 2.62%
Vedanta Resources (VED) 870.72p 2.58%

FTSE 250 - Fallers

Hochschild Mining (HOC) 248.05p -5.65%
TalkTalk Telecom Group (TALK) 142.70p -4.55%
Sports Direct International (SPD) 379.40p -3.39%
IP Group (IPO) 136.80p -2.98%
Pets at Home Group (PETS) 164.50p -2.89%
JD Sports Fashion (JD.) 342.50p -2.78%
Acacia Mining (ACA) 195.80p -2.68%
Derwent London (DLN) 3,018.00p -2.65%
McCarthy & Stone (MCS) 149.90p -2.54%
Card Factory (CARD) 287.80p -2.44%