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FTSE rises; Supergroup makes a super start to the year

Published: 13:24 16 Dec 2015 GMT

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LUNCHTIME REPORT

The UK’s main market continued its rise on Wednesday after making triple digit gains on Tuesday.

While it was a good day for the large caps, the standout performer was Supergroup (LON:SPG), which lived up to its name as the owner of the Superdry brand reported a strong first-half trading update.

Shares jumped by more than 10%, briefly hitting a 20-month high of 1,712p as it reported total revenues climbed 22% to £254mln in the 26 weeks to October 24.

Investors were cheered by its underlying pre-tax profit, which grew 73% to £21.7mln, and by the news it will pay a maiden interim dividend of 6.2p to shareholders on February 5.

Shares, which are 87% higher this year, added a further 10% to 1,670p, having dropped by the same amount yesterday on a broker’s suggestion that it has too much stock and could be forced to discount before Christmas.

The FTSE100, which is down around 7.5% on the year, rose almost 1%, or 59 points, to 6,076 by lunch.

Leading the charge was Pearson (LON:PSON) following a couple of upbeat broker notes from Exane BNP Paribas and Bernstein.

The firm, which recently sold the Financial Times to concentrate on its education business, rose more than 5% to 744p.

Also higher was pharma giant Shire (LON:SHP), as reports surfaced that it was among several firms considering bids for US drug company Intercept Pharmaceuticals, which develops treatments for chronic liver diseases.

Intercept is understood to have received several approaches and has appointed investment bank JP Morgan to assess them, according to a market source.

Other potential bidders for Intercept are said to include GlaxoSmithKline (LON:GSK) of the UK and companies in Switzerland and the US.

Shire, which saw shares climb 4.6% or 191p to 4,373p,and Intercept were unavailable for comment.

Staying with the inhabitants of the FTSE100, Rolls-Royce (LON:RR) has decided it needs a management shake-up as it looks to turn the business around.

The plans revealed on Wednesday will see the end for its current structure splitting its aerospace and land and sea divisions.

Tony Wood, the president for aerospace who has been with the company for 15 years, and Lawrie Haynes, the boss of land and sea, will leave the company as a result. Shares climbed around 3.6% to 559p.

Over in the US, Markets are set to continue yesterday's frenetic advance this morning, ahead of today's crunch announcement from the Fed on interest rates.

Spread betting quotes point to a 143 point gain for the Dow Jones industrial average while the S&P 500 is tipped to rise 13 points to around 2,056.

Back in the UK, on the small cap front, Bonmarche (LON:BON) plummeted 28% or 83p to 214p as the discount clothes retailer blamed mild weather for a profit warning and said its chief executive was quitting, sending its shares tumbling.

On a more positive note, AEC Education (LON:AEC) jumped 30% to 1.6p as KSP Investment loaned the company up to £1mln.

The loan is unsecured and has no interest, and will be paid as soon as possible out of future profits.

Transense Technologies (LON:TRT) was also higher, up 21% to 1.4p. The vehicle testing specialist inked a deal with tyre giant Continental (ETR:CON) to supply it with its latest Translogik tyre inspection probes.

MORNING REPORT

Takeover activity buoyed London shares on Wednesday as the possibility of a US rate hike loomed.

Royal Bank of Scotland (LON:RBS) confirmed market speculation that it had received approaches for its Williams & Glyn banking business.

The arm, which has about 300 branches in the UK, is said to be worth about £1.5bn.

RBS had planned to float the branches, which trade as RBS or NatWest, as Williams & Glyn next year under a plan agreed with the European Commission in return for the bank’s taxpayer bailout in the financial crisis.

RBS said in a statement: "The strategic attractiveness of Williams & Glyn has been reflected in a number of informal approaches for the business.

"Therefore whilst continuing preparations for an initial public offering (IPO), we are planning to launch a trade sale process in (the first half of) 2016, and targeting the signing of a binding agreement to sell the business by year-end 2016, with full divestment by the end of 2017." Shares in RBS rose 0.1p to 288.9p.

AstraZeneca (LON:AZN) rose 34.5p to 4425.5p as it continued its buying spree with the acquisition of Japanese giant Takeda’s respiratory business for US$575mln.

The earnings-enhancing deal gives it the rights to roflumilast, a treatment for obstructive pulmonary disease, the catch-all name for conditions such as emphysema and chronic bronchitis.

AstraZeneca bought ZS Pharma last month and has confirmed market talk that it is "exploring potential strategic options" with Dutch-US group Acerta Pharma.

The Takeda deal is the latest consolidation move in the industry, with rival Shire rumoured to be revising its bid for Baxalta and also considering other bolt-on acquisitions. Shire (LON:SHP) shares rose 107p, or 2.56%, to 4289p.

The FTSE 100 Index rose 26.71 points to 6044.5 as investors brace for the first US interest rise in almost ten years.

Asia was strong, with Tokyo and Hong Kong both adding 2% as investors adjusted for the Fed decision. China's Shanghai Composite closed slightly up.

Back in the London market, investors pulled out of Alecto Minerals (LON:ALO) by 0.01p, or 10.8%, to 0.06p as the miner unveiled plans to work with South Afrcian consultancy group PenMin to develop Matala and Dunrobin, its recent gold mine acquisitions in Zambia. It also put the potential cost of getting Matala into production at US$18mln.

Video editing firm Forbidden Technologies (LON:FBT) gained 0.12p to 8.5p as it unveiled a partnership with Red Letter Days and its social video network Eva.

MARKET PREVIEW

More gains are predicted when London opens as investors brace for the first US interest rise in almost ten years.

Financial spread bet firms see FTSE 100 adding 20 points at the open after the index surged 144 points or almost 2.5% yesterday to 6,018.

Overseas markets also enjoyed themselves ahead of the rate decision this evening, with the Dow Jones Industrial Average 157 points higher at 17,525, with big gains as well for the S&P 500 and Nasdaq.

Once the deed is done, attention will switch to how quickly a second rise will follow and it is what Fed chair Janet Yellen says on this that may set tone for markets on Thursday.

Asia was strong with the exception of China, with Tokyo and Hong Kong both adding close to 2%  as investors adjusted for the Fed decision.

There is some UK company news expected with electrical retailer Dixons Carphone’s half year results.

How it fared over the recent Black Friday/Cyber Monday weekend will be one thing City folk will watch for, though store closures may also be something to keep an eye on.

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