London Report: China data and bullish retailers drive FTSE rally

THE UK’S benchmark stock index rose yesterday after Chinese economic data came in a touch above forecasts, with Tesco rising on aggressive strategy plans and Sports Direct surging on a bullish note about the company.

The sportswear retailer surged 5.6 per cent to the lead FTSE 100 gainers.

Traders cited a note from Bank of America Merrill Lynch as saying it could grow its top line at a compound annual growth rate of seven per cent over the next 10 years, driven by online sales and European expansion.

The market was broadly helped by data showing China’s economy grew 7.4 per cent in the January-March quarter from a year earlier, just above a forecast of 7.3 per cent.

March data showed retail sales were a shade above forecasts with an annual rise of 12.2 per cent.

“Investors have taken Chinese growth numbers positively, but they are cautiously optimistic as defensive sectors are in favour today,” James Butterfill, global equity strategist at Coutts said. “Aside from some possible seasonal weakness in May, we like equities. We are positive on healthcare stocks, which remain good value with an attractive dividend yield,” he said.

Pharmaceutical shares, generally seen as defensive plays, added the most points to the blue-chip FTSE 100 index, with GlaxoSmithKline, AstraZeneca and Shire rising one to 1.6 per cent. The FTSE index closed 0.7 per cent higher at 6,584.17 points, after falling 0.6 per cent on Tuesday, on relief that Chinese growth was steadier than some had feared.

“In terms of where we are focusing our positions and our positive stance, within the emerging markets context we are trying to pick names which are more skewed towards China than the current account deficit economies,” Ian Richards, global head of equities strategy at Exane BNP Paribas, said.

Among individual sharp movers, Tesco, which is heavily weighted in the FTSE 100, rose 2.6 per cent after posting in-line results and its chief executive Philip Clarke said he would respond to both the discount groups and the upmarket grocers that have hit Tesco sales.

“Although the figures highlight the difficult trading conditions the group faces, the statement comes as something of a relief following a period of poor share price performance, while a focus on capital discipline and cash generation means the dividend has been maintained,” Jonathan Jackson, head of equities at Killik & Co, said.