Leading shares moved higher for the fourth trading day in a row and hit a six week high.
Weak inflation data and mixed trade figures from China - imports down but the overall number better than expected - prompted talk that the country might sanction further stimulus measures to boost the economy.
Supermarkets were in focus, with Tesco and J Sainsbury ending as the top rise and the top faller respectively in the FTSE 100. Tesco was lifted 8.45p to 192.9p by a more positive note from Bernstein Research, but Sainsbury slid 6.9p to 254.7p on concerns it might cut its dividend when it unveils its latest update and strategic plans on Wednesday.
Overall the FTSE 100 finished 44.01 points higher at 6611.25, its best level since 30 September, despite continuing concerns about the situation in Ukraine. Sentiment was helped by Wall Street hitting yet more records by the time London closed.
Property group Hammerson was unchanged at 606.5p as the shopping centre specialist said consumer and occupier market conditions were improving in the UK, but remained subdued in France. Oriel analysts said:
Hammerson’s [update] shows the company has had another busy period of acquisitions (helped by a £399m capital raising), developments and refurbishments. Management has led the way in its cost reduction programme in the real estate investment trust sector, culminating with the sale of its own head office during the period, and its balance sheet remains conservatively managed. New lettings were significantly ahead of previous passing rents (8.5% ahead), with the UK showing particular strength compared to France. Headwinds remain, particularly in France where shopping centre sales were down 2.8% (up 2.6% in the UK). We retain our hold rating.
One of the day’s major disasters was outsourcing group Serco, down 32% at 215p after a grim update and £550m cash call.
Elsewhere Just Retirement jumped nearly 5% to 131.5p after a better than expected update. It said government reforms of the annuity market hit sales, with individual annuities down 59% in its first quarter, with total sales down 42% to £255m. But sales of bulk annuities rose from £3m to £25m, with two major new contracts written so far in the second quarter. Eamonn Flanagan at Shore Capital said:
Just Retirement issued a punchy first quarter statement which highlights the progress the group continues to make in the defined benefit market which is helping to offset the damage inflicted on its individual annuity offering from the Budget changes in March. Trading at a 35% or so discount to the embedded value at the end of June 2014, of 191p, the market is factoring in a near ‘run-off’ valuation to the stock, and thus implying no future new business prospects. Today’s statement highlights the opportunity for the business in the defined benefit market, the resilience of management and the strength of the underlying product offering. These shares appear materially undervalued in our view.
Genel Energy rose 58p to 812p on hopes for its oil business in Kurdistan following a government statement on exports last week. UBS moved its recommendation from neutral to buy, and analyst Daniel Ekstein said:
On Friday the Kurdistan Regional Government [KRG] announced oil exports via its Khurmala-Fishkabur pipeline to Turkey at a record 300,000 barrels a day and on track to hit 500,000 barrels by the first quarter of 2015... Moreover, it will make an inaugural payment of $75m this month to producers (i.e. Genel) for exports in line with their contractual entitlement and promises further regular payments to follow.
With multiple cargoes shipped and paid for, this route to market for Kurdish oil, which bypasses Iraqi infrastructure, is being legitimised. And it is scaleable... We had concerns significant strain (humanitarian and defence) on the KRG’s finances could see a delay in payments to its contractors. The payments loop has closed quicker than expected.
Why buy Genel? As Kurdistan’s leading resource holder Genel is enviably positioned as export markets open. Its main assets (Taq Taq; Tawke and Miran) are world scale, low cost fields. It can grow production towards 300,000 barrels a day later in the decade. The company is already in a net-cash position, and generates positive free cash flow immediately, providing for possible cash returns alongside growth. It has a significant gas resource and plans to export molecules to Turkey from 2018. We expect an update on project structure and terms with its capital markets day later this week.
Finally Aim-listed drinks group Distil surged 133% to 1.4p after it signed a number of agreements for its premium brands ahead of Christmas
Pubs group Mitchells & Butlers will stock RedLeq spiced Caribbean rum across its 102 Castle Pub estate, including the Spaniards in Hamptead, London.
Wholesaler Booker has agreed to take the rum in its 175 cash and carry branches, while Sainsbury is promoting its Blackwoods gin and Tesco has listed Blackwoods vodka in northern Ireland. Majestic Wine and Australian retailer Dan Murphy are also promoting the company’s products.
