Weak pound and broker notes send FTSE soaring
THE FTSE 100 flirted with record highs yesterday, buoyed by a retreat in the pound and a series of uplifting broker notes.
The blue-chip index even managed to push back through the 7,500 mark for most of the day after the pound tumbled back below $1.30 as the Conservatives’ election lead over Labour narrowed.
A weaker pound tends to benefit the Footsie because many of its members generate their earnings overseas in foreign currencies, and these are worth more when exchanged for pounds.
The index eventually closed up 0.3pc, or 25.63 points, at 7496.34 – just 26 shy of its record 7522, hit last Tuesday.
In a relatively quiet day for markets, product testing firm Intertek was among the index’s biggest winners. An upgrade from analysts at Kepler pushed the stock up 2.1pc, or 89p, to an all-time high of 4256p. Kepler said market conditions are supportive for Intertek, which ensures the quality and safety of a huge range of products from toys to car headlights. As a result, it expects the company to report a 13.5pc increase in sales at its next results.
It raised the firm to ‘buy’ from ‘hold’ and hiked its target price to 4600p from 3935p.
Luxury retailer Burberry also had a strong day after being upgraded by Credit Suisse.
The broker said the fashion house’s relocation of 300 staff to Leeds and a beauty deal with American firm Coty suggest it is really trying to cut costs.
Burberry reported a 21pc drop in profits for the year to April, while new chief executive Marco Gobbetti joins in July. But Credit Suisse said these uncertainties mean the firm is unlikely to make any large deals for the time being, allowing it to continue its upward trajectory. It raised Burberry’s price target from 1550p to 1650p, citing limited earnings risk. Shares rose 2.4pc, or 42p, to 1756p. Other upgrades included Paddy
Power Betfair, which jumped 2.1pc, or 180p, to 8560p following an upgrade to ‘neutral’ by Credit Suisse, and Marks & Spencer, which rose 2.8pc, or 10.6p, to 395.5p – the FTSE100’s highest riser.
Broker Jefferies hiked M&S’s target price from 370p to 420p, while Barclays added the stock to its European recommended portfolio in a piece of research which urged investors to ‘buy British’.
But Credit Suisse didn’t let everyone off so easily.
Micro Focus had an awful session after the broker said the software firm is in dire need of a reboot.
It cut the firm to ‘underperform’ from ‘neutral’ and said: ‘For Micro Focus, dealing with structural pressures on the business has a cost that is manifested in a permanent restructuring burden.’
Micro Focus shares sank 3.8pc, or 93p, to 2379p. In small-cap land, TBC Bank
Group was one of the day’s big winners after reporting strong profits in its first-quarter results.
It became Georgia’s leading bank last October after acquiring the Georgian subsidiary of Societe Generale. Over the first three months of the year profits rose 64.5pc on the same period last year, to £30.8m, while its total assets rose 55.7pc to £3.3bn.
TBC Bank Group has rewarded investors by increasing its target percentage of earnings paid to shareholders in dividends – or its dividend payout ratio – to between 25pc and 35pc. Shares rose 4.3pc, or 69p, to 1672p.
Beauty firm InnovaDerma advanced 13pc, or 29.5p, to 257p after launching a shampoo and conditioner range to aid hair regrowth and thickening. The products will be available in Superdrug from August.