FTSE starts the week higher Primark and Hammerson in focus

The FTSE has opened the new week in positive territory, putting last week’s losses behind it. The stronger start comes after a broadly upbeat overnight session in Asia and following a strong finish to the previous week Wall Street, where the Dow closed 344 points higher, the S&P gained 1.6% and the Nasdaq increased 1.7%.  

On the FTSE, almost all the sectors were trading higher with personal goods and home construction putting in notable performances thanks to Primark’s owner Associated British Food’s encouraging forward outlook and a solid set of numbers from Hammerson. 

Investors focus on Primark’s encouraging outlook 

A string of new shops helped boost sales at Primark by 9% in the first half of the financial year, however the chain also saw a dip in revenues at its existing stores, hit by unusually warm weather in autumn. As a result, like for like sales, stripping out the effects of store openings was down roughly 1%. 

The fact that the share price is up over 1.5% in early trade suggests that investors are in forgiving mood on Monday and happy to accept Primark’s explanation of this being a temporary slowdown. Furthermore, investors are focusing on the strong outlook for the budget retailer, with profit growth expected to accelerate thanks to a weaker dollar and stronger buying performance.  

Hammerson occupancy levels at 17 year high, yet could be relegated out FTSE 100 

The focus remained on the under-pressure retail sector as investors also digested results from the retail property group, Hammerson. 

Hammerson initially impressed investors by achieving a record level of lettings this year, despite the difficulties within the retail sector, with occupancy levels at a 17-year high, pushing its net income up 6.9%, however, like for like net rental income grew 1.7%, behind its target of 2%. These are a solid set of results given the difficult trading environment that Hammerson is facing. 

Footfall in shopping centres if falling and pessimism over bricks and mortar retail is rising, making Hammerson’s job a particularly difficult one. The knee jerk reaction from investors sent he share price higher on the open, however concerns over the health of the industry in general and the miss on like for like net rental income meant the shares quickly dipped lower.

Concerning the takeover of Intu, investors are punishing Hammerson for the move. The share price of Hammerson has dropped from a high of 547p in January to 476p today, putting Hammerson in danger of being relegated out of the FTSE100 next week. 

On the other hand, shares at Intu are up a solid 8%, over the same period, although both share prices are trading lower than the value of the property they own. 

Look ahead 

With little in the ways of economic data for the US, we are expecting a relatively quiet session. Yields will remain in focus; however they have eased from last week’s 4-year highs, provide some respite to US equity indices and the dollar.