A WAVE of upbeat corporate earnings pushed Britain’s benchmark equity index back towards seven-week highs yesterday, with signs of resilience among British consumers as the economy recovers.
Kingfisher added 3.1 per cent after Europe’s biggest home improvements retailer reported a return to underlying sales growth in Britain, while budget airline EasyJet gained 3.7 per cent on rising revenues.
The pickup in the British economy, whose drivers include central bank stimulus and government initiatives to bolster the housing market, is expected to be confirmed by second-quarter GDP figures showing the pace of economic expansion doubling to 0.6 per cent.
That has prompted Goldman Sachs and UBS to recommend long bets on British equities and led investors to take their most optimistic stance on the market in over a decade, according to the latest Bank of America Merrill Lynch survey.
“We have turned the corner now in the UK and it’s amazing what a stimulus to the housing market can do for raising confidence,” said Edward Bland, head of research at Duncan Lawrie Private Bank, which prefers British stocks to those in the Eurozone.
“Earnings expansion is on the cards for maybe double digits this year and next year,” he added.
Solid earnings numbers yesterday also came from sweetener maker Tate & Lyle, whose shares added 3.6 per cent after it stuck to its full-year profit guidance.
Strong earnings numbers yesterday also came from chipmaker ARM, which rallied 5.7 per cent as markets had been anticipating a weak release following weak numbers from some of its technology sector rivals.
The earnings lift helped the FTSE 100 rise 22.99 points or 0.4 per cent at 6,620.43 points.
But with heavyweight miners succumbing to profit-taking after recent strong gains, the index yet again lacked the momentum to break above technical resistance at seven-week highs, around the 6,597-6,660 area.
“There is a bit of an inflection point around here. Personally, I still think we can probably move higher, but we have had a slight loss of momentum in the last few days,” said Dominic Hawker, technical analyst at Messels, highlighting the May 22 peak of 6,875.62 as a potential upside target.