The FTSE touched an 11-month high this morning, as investors continued to plough into equities after Kingfisher disclosed better than expected bottom line figures.
'The market has decided now that the recovery is around the corner, unemployment is not a problem, housing is not a problem, and we’re going to live happily ever after,' said Andy Brough of Schroder Investment Management. 'A lot of companies have produced reasonable numbers, like Kingfisher today, and you get a feeling that actually companies have performed pretty well.'
DIY retailer Kingfisher swiftly published details of its upcoming interim results after draft figures were mistakenly circulated yesterday. The owner of the B&Q chains said it expects underling pre-tax profit to come in between £285 and £290 million, which is around 7% higher than Bloomberg’s median analyst estimates and well above last year’s comparative of £214 million.
This disclosure helped its shares rise 2.7% to 222.8p, while rival Home Retail Group edged 1.4% higher to 330.1p. Investors are likely to eye up Kraft’s shares this afternoon as American equity markets resume trading following Monday’s Labor Day holiday.
M&A news also contributed to market optimism this morning; Cadbury’s shares rose 2.1% to 799.5p, extending yesterday’s hefty 38% rise, after rejecting Kraft’s 745p offer. The market is now speculating that Kraft will come back with a sweetened offer for Cadbury, perhaps even attract rival bidders.
Analysts at JPMorgan believe that Kraft will hike its offer up to 820p a share, while Bank of America-Merrill Lynch anticipates a revised offer in the region of 820p to 830p a share. In the meantime, Credit Suisse upgraded Cadbury shares from 'underperform' to 'neutral' and upped its price target from 575p to 800p a share.
Also in the limelight were communications giants Deutsche Telekom and France Telecom, which announced that they intend to merge their UK mobile operations into a new 50-50 joint venture – a development that would see two of the sector's smaller player's leapfrog over Vodafone and O2 to gain a 37% share of the UK market. Reuters has reported that this merger will help Deutsche Telekom's T-Mobile UK and France Telecom’s Orange UK generate synergies of around €4 billion. Vodafone's shares gained 2% to 137.3p.
Elsewhere, pub group Greene King posted a healthy 4.6% rise in like-for-like sales in the 17 weeks to 30 August. In addition, food business experienced growth of 8.1%, while sales at Scottish business Belhaven jumped 10.9%. Shares in Greene King climbed 3.8% to 498.5p.
Miners also put on a strong showing today, after October gold futures climbed to a six-month high of $1008.2 an ounce on the back of a weaker US dollar and long-term inflationary concerns. Shares of African-based gold miner Randgold Resources benefitted from a rise in the commodity, rising 3% to 4350p.
Other star performers included Kazakhmys, Antofagasta, Anglo American and Rio Tinto, which climbed 5.3% to 1067p, 3.7% to 766.5p and 3.5% to 2077p and 3.3% to 2546p respectively.
On the economic front, official government reports revealed that UK manufacturing output advanced at its fastest pace in the 18 months to July, boosted by a pickup in car production. The Office for National Statistics revealed that factory output climbed 0.9% in July, substantially ahead of Bloomberg’s median estimates for a 0.3% increase and the prior month’s 0.6% rise.
'We were looking for good numbers with the car scrappage scheme helping output, the purchasing managers index also pointing to very strong output and sterling weakness pointing to a robust outcome,' ING's James Knightley. 'It does suggest we're going to get a positive third-quarter GDP figure, meaning the end of the technical recession in the UK economy.'
By around 10.30am (London time), the FTSE 100 was trading 30.85 points (+0.63%) higher at 4964.03, while the broader FTSE 250 was 111.91 points (+1.25%) above its previous close at 9048.37.
