The FTSE 100 clawed back Monday losses in positive trading on Tuesday as investors looked for oversold bargains and took a more sanguine view of inflationary pressures and potential rising interest rates.
At the close, the benchmark FTSE 100 finished around 0.5% higher at 7,491.70, above the 7,485.28 level at which it started the trading week. Mid-caps ended roughly flat at 23,000.
US stocks lost early ground after initial gains although there were signs of a modest recovery in tech after a rough start to the year due to inflation concerns and looming interest rate hikes. The Nasdaq Composite was around 0.8% ahead.
The Dow Jones failed to hold on to gains, drifting 0.15% lower, but the broader S&P 500 index added 0.25%.
Profit upgrades from the likes of FTSE 100 components company Electrocomponents (ECM) and cyber security firm Darktrace (DARK) brightened investors’ mood ahead of the release of key US inflation data on Wednesday.
Next (NXT) closed 4.5% up at £80 after a strong performance in the 12 weeks to the middle of December compared to the rest of the clothing sector.
The consensus forecast is for inflation to have hit 7.1%, meaning all eyes will be on the Federal Reserve and how quickly it plans to take action to try and curb the high cost of living.
Among blue chip names, Scottish Mortgage Investment Trust (SMT) rallied more than 5% to £11.985 following recent weakness caused by concerns over how rising interest rates would affect valuations for the fast-growth stocks it favours.
SUPPLY CHAIN PLAY
Electrocomponents rose 1% to £11.89 as the industrial and electronic equipment supplier upgraded its full year profit outlook after third quarter revenue grew by more than a fifth, driven by performance in the Americas.
The company now expects full year adjusted pre-tax profit to be slightly ahead of consensus estimates of £278.2 million.
Dechra Pharmaceuticals (DPH) improved 3% to £44.48 as the veterinary pharmaceuticals giant agreed to acquire the worldwide rights to Anivive Lifesciences’ canine lymphoma treatment in dogs for an undisclosed sum.
Cyber security company Darktrace saw earlier sharper hikes pared but still made almost 7% gains at 421p after raising its guidance on annual performance following ‘significant’ growth in the first half to December 2021.
The FTSE 250 firm increased constant currency annualised recurring revenue guidance for fiscal 2022, forecasting a year-on-year increase of between 37% and 38.5% to about $426 million, up from 34% to 36% previously.
Guidance for its 2022 adjusted EBITDA margin was lifted to between 3% and 6%, up from 2% to 5% previously on revenue growth of between 42% and 44%, up from 37% to 39% previously.
The upgrade was supported by first half ‘outperformance’ with revenue expected to be at least $190 million, reflecting year-on-year growth of at least 50% as its customer base rose by 39.6% year-on-year.
Digital transition company Kainos (KNOS) gained 1% to £16.44 as investors welcomed the acquisition of Blackline, a US-based services firm that focuses on procurement, for an undisclosed sum.
The bolt-on acquisition will ‘further enhance Kainos’ Workday presence in North America and Europe by adding over 50 spend management and procurement consultants from Blackline group who will support the expansion of Kainos’ Workday capabilities, client base, and expertise’, enthused the company.
Fantasy miniatures maker Games Workshop (GAW) softened 0.4% to £97.20 after its first half profit slipped, despite a rise in revenue, thanks to higher costs including staff wages, though Games Workshop raised the interim dividend by 25% to 100p per share.
AROUND THE MARKET
Power components designer XP Power (XPP) added 2.5% to £49.20, despite warning 2021 adjusted operating profit will be modestly below the lower end of analysts’ £46 million to £48 million range after supply chain constraints squeezed revenue, as investors focused on the fact XP Power enters 2022 with a record order book.
Elsewhere, recruiter Robert Walters (RWA) gained 1.2% to 820p as the staffer upgraded profit guidance for the year to December 2021 after fourth quarter gross profit grew by a third.
Wealth manager Rathbones (RAT) firmed 0.7% to £20.60 on the news its annual funds under management jumped by 25% in 2021, thanks to positive market movements and fresh inflows into its funds.
The group’s funds under management and advice at 31 December amounted to £68.2 billion, up from £54.7 billion at the end of 2020.
Rival wealth manager Premier Miton (PMI:AIM) cheapened 3% to 197.5p after reporting flat first quarter assets under management after experiencing net outflows from its funds.
And in the retail sector, value footwear retailer Shoe Zone (SHOE:AIM) rallied 5.9% to 125p after swinging to a full year profit after cost cutting helped offset a fall in sales during the pandemic.
Pre-tax profit for the year to 2 October 2021 amounted to £9.5 million, an impressive turnaround from a £14.6 million loss a year earlier, despite sales slipping 2.9% to £119.1 million.
Though Shoe Zone did not declare any dividends for the year, it is now eligible to reinstate ‘modest’ dividend payments and intends to return to the dividend list this year.
