Market Report: Next trades higher on retail recovery hopes

Next led the retail sector higher last night, closing with gains of more than 7 per cent amid hopes of an earlier-than-expected recovery on the UK high street, which has suffered as the recession has gathered pace.

The fashion retailer advanced to 1435p, up 98p, after Citigroup said that, for the first time in 24 months, sector earnings "look to have [an] upside forecast risk". The bullish comments were down to an analysis of household cashflow, which is correlated to consumer demand and, according to Citi, should improve throughout this year, and in 2010.

The result is likely to be a stabilisation of trends in like-for-like sales, with some benefit for the stronger players that have survived the reduction in capacity across the market.

"In assessing the valuation of Next, the share-price debate centres on the trade-off between the likelihood management can deliver earnings recovery going forward following four years of sharp like-for-like sales declines, and the group's modest forward valuation multiples," Citi said.

"In the wake of our macroeconomic analysis, illustrating the likely improvement in real UK household cashflow in 2010, we argue that the Next earnings forecast agenda is more credible, despite currency-driven input cost pressures."

In light of its conclusions, the broker advised clients to buy into the retailer, arguing that the share price discount between Next and its peers appeared "too wide".

In the wider sector, Debenhams, whose target price was upped to 75p from 70p by Citi, climbed to 63.5p, up over 9 per cent or 5.5p, while Carphone Warehouse, which has confirmed demerger plans as it posted a positive fourth-quarter trading statement, gained 7.1 per cent or 9p to 136.3p.

Tesco, which brought cheer to the sector with its results in the session before, remained firm, gaining 3p to 351.3p, while Kingfisher, the home improvement retail group behind the B&Q chain, was 7.4 per cent or 12.1p ahead at 174.8p.

Overall, the markets were steady, with the FTSE 100 gaining 43.2 points to 4,030.66 and the FTSE 250 climbing 172.71 points to 7,159.96 after the Chancellor of the Exchequer, Alistair Darling, unveiled the Budget.

New measures to resuscitate the property market, including new measures to aid the flow of mortgage financing, boosted housing stocks, including Bellway, which climbed to 762p, up 6.7 per cent or 47.5p, and Persimmon, which gained 4 per cent or 15.5p to 395p.

The announcements also lifted the blue-chip commercial property stocks, which have suffered in recent sessions as brokers warned investors against reading too much into the sector-wide rally that boosted share prices to new highs earlier this month. The rebound lifted Hammerson to 310p, up 11.3 per cent or 31.5p, while Liberty International gained 3.4 per cent or 14.5p to 445.25p.

Mortgage lenders also welcomed the prospect of some stability in the housing market. Barclays, for example, climbed to 218p, up 9.6 per cent or 19p, shrugging off some disappointing news from Morgan Stanley, which posted a bigger than expected loss for the last quarter, and the announcement by the Qatar Investment Authority that it had sold down its stake in the group to 5.82 per cent.

The QIA said the move was part of its portfolio management strategy, and it continued to remain supportive of the bank.

Lloyds Banking Group, the target price for which was lifted to 120p from 100p at UBS, was also unfazed by the news from Morgan Stanley, climbing to 100.5p, up by more than 5 per cent or 5.5p.

"As well as having been recapitalised and de-risked through its involvement in the UK Asset Protection Scheme, Lloyds has, in our view, a balance sheet structure which affords more protection than most from structural margin pressures in the current interest rate environment," UBS said, reiterating its "buy" stance on the stock.

Elsewhere, the oil explorers and producers Tullow Oil, up 6p at 766p, and Dana Petroleum, up 17p at 1193p, were relatively unmoved by Budget proposals, including tax exemptions and targeted capital gains relief, to shore up investment in the North Sea oil industry.

"We believe the industry was looking for more specific incentives, ie a further uplift on capital investment and/or target incentives to accelerate the development of West of Shetland infrastructure, and so is unlikely to be satisfied with the measures proposed in the Budget," the ABN Amro analyst Phil Corbett said.

Insurers fell back as traders digested proposed changes to the tax relief on pension contributions by those earning more than £150,000. Friends Provident was the hardest hit, losing 4.4 per cent or 2.8p to 60.8p.

Among smaller companies, Central African Mining gained almost 20 per cent or 1.4p to 8.47p after announcing a positive resource estimate for one of its coal assets in Mozambique. Analysts said the news may tempt larger players such as Brazil's Vale, which may bid for the group's coal assets.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there