FTSE trades above 5800 level on retail strength
City Index March 24, 2011 7:16 PM
<p>The FTSE 100 broke back above the 5800 level this morning, having previously met resistance at this level earlier in the week, as retail stocks […]</p>
The FTSE 100 broke back above the 5800 level this morning, having previously met resistance at this level earlier in the week, as retail stocks such as Next, Kingfisher and Marks and Spencer’s surged higher in early trade.
It has been the high demand for retail stocks this morning, coupled with continued support from the miners on higher commodity prices that have helped to charge the FTSE 100 Index back above the 5800 level. The UK Index may struggle however with resistance around the 5875 level but should it break above 5900, it could pave the way for a retest of the psychologically important 6000 level.
European stock waters have appeared undisturbed by the growing fiscal instability within Portugal with PM Socrates handing in his resignation after a crucial austerity vote failed last night. It is hard to see the indebted nation not requiring an Ireland or Greek style bailout without a widely agreed austerity plan. However, I get the feeling that traders are digesting this news without much surprise and are comforted by a belief that the EFSF fund has more than enough cash to help Portugal. The one that traders live in real fear of is if Spain were to head into a similar path to that of Portugal.
We have had several good retail stories combining today to lift the sector some 3% in London. Next shares have rallied straight to the top of the FTSE 100 leader board after the high street retailer met forecasts with a 9% jump in yearly profits and hiked its dividend by 18%. The retailer also pleased shareholders by stating that they are likely to continue to generate surplus cash which could be used for share buybacks or dividend hikes. Shares in Kingfisher were similarly bullish today after the firm reported a 23% increase in full year profits. Kingfisher also hiked their dividend by 28%, a factor always enjoyed by shareholders. Marks and Spencer’s shares joined the retail band wagon also, with traders buying into its shares in a sector wide move.
UK Retail Sales slump more than expected in February
However, data which showed that retail sales in the UK slumped 0.8% in February, slightly more than the market had expected, threw the cat amongst the pigeons somewhat. In reaction to this we saw some minimal early profit taking in retail stocks and traders also sold the pound sterling, which fell 0.5% against the dollar.