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FTSE hits 2016 high after Chinese data, while Halfords accelerates on update

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Mining shares are leading the lot after better than expected Chinese trade data renewed hopes of a positive outlook for the world’s second largest economy, helping the FTSE 100 to a new high for the year.

But retailers are also in focus, with Tesco leading supermarkets lower despite signs of a turnaround, and Halfords higher following a strong fourth quarter.

The car parts and bicycle specialist has reported a 2.6 per cent like for like rise in fourth quarter revenue and confirmed full year profit guidance of between £78m and £82m. In cycling bike sale continued to rise for the second consecutive quarter, but parts and accessories fell. Motoring sales were boosted by in-car dashboard cameras, car cleaning products and travel equipment, while its Autocentres business benefited from site refurbishment investment.

Halford’s shares are up 4% at 401.8p, and Stifel analyst Scott Ransley said:

Sales exceeded our low-end expectations although profit guidance is unchanged. Nevertheless against some challenging comparisons we would view this as a positive retail performance, following the resilient third quarter in Retail. Given the flat 2017 growth outlook, we believe the shares could continue to trade in the 320-420p range.

Analysts at Liberum were less positive:

We see a strong fourth quarter as encouraging, although one quarter does not make a trend and we need to see further momentum before turning more positive. We maintain our sell recommendation, but acknowledge that there are some clear positives, including a healthy balance sheet, a 4%+ dividend yield and the potential for near-term special cash returns.

But WH Smith is down 45p at £17.60 following its half year results, and Tesco has dropped 7.45p to 188.85p on worries about a cautious outlook even though it reported its first quarterly sales growth for three years. Joe Rundle at ETX Capital said:

The headline figures are promising, but Tesco is like an oil tanker that takes a long time to turn around and although not through the turn at least it’s started to head in the right direction…

Nevertheless, there appear to be no shortage of problems ahead for Tesco, with continued competition on both sides of the high street; from the likes of Aldi and Lidl at the low-end to Waitrose at the high-end. Tesco also has to contend with the emerging threat from Amazon in the online sector. Despite reducing net debt by 40%, at £5.1 billion Tesco still has too much debt and its bonds are rated as junk.

Morrisons has also fallen, down 1.8p at 199.4p.

Overall the FTSE 100 is up 78.02 points at 6320.41, with Anglo American up 42.3p at 681p and Rio Tinto rising 113.5p to £22. This is the highest level for the leading index since early December. Tony Cross at Trustnet Direct said:

That’s been a rather impressive start to the day’s session for equities with the FTSE-100 charging higher at the opening bell and punching rather unexpectedly through the 6,300 level. Commodities remain very much in focus – we’ve seen base metals soaring in the last few hours helped by upbeat Chinese import data and even if oil prices are coming off the boil a little, the bulls are still winning out at least for now. Critically there’s an element of uncertainty hanging over whether producer nations will be able to agree a meaningful production freeze this weekend and we’ve seen a little profit taking on crude as a result, but so long as we can hold onto the majority of these recent gains – that $40/barrel (£28.09/barrel) level holds psychological significance – then the broader based equity rally may be sustainable.

Brent crude is down 1% at $44.18 a barrel (£31.03 a barrel) despite a dip in the oil price which shows no sign of a serious plunge ahead of this weekend’s meeting of oil producers. There are hopes that there will be some kind of agreement to freeze output in an attempt to tackle the supply glut.

Defensive stocks such as utilities are out of favour as investors are happy to move into riskier assets. SSE is down 7p at £15.14, United Utilities has lost 4p to 956p and Severn Trent has slipped 10p to £22.33.

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Paul

The author Paul