LONDON MARKETS: FTSE 100 Rises Despite Next Gloom, As Commodity Stocks Spread Cheer

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Retailers dragged lower as Next turns more cautious on outlook

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U.K. stocks moved up Wednesday, with commodity shares guiding the way. But Next PLC shares tumbled after the clothing and homeware retailer struck a cautious tone in its quarterly earnings report.

A better-than-anticipated report on British manufacturing activity arrived ahead of the Bank of England's rate decision Thursday.

What markets are doing: The FTSE 100 index rose 0.2% to 7,508.32, led by the basic materials sector. But industrial, financial and consumer-related shares were in the red. On Tuesday, the London benchmark rose 0.1% (http://www.marketwatch.com/story/ftse-100-advances-as-bp-shares-rally-to-3-year-high-2017-10-31). It also logged an October gain of 1.6%, the best monthly performance since May.

Meanwhile, the pound hit an intraday high of $1.3321 before moving back to $1.3305. That's still higher than $1.3283 late Tuesday in New York. Against the euro, sterling bought EUR1.1434, up from EUR1.1404 in the previous session.

Retailers in focus: Shares of Next PLC (NXT.LN) dropped 7.4% after the clothing and furnishings retailer narrowed its pretax profit and sales guidance (http://www.marketwatch.com/story/next-sales-rise-narrows-guidance-on-profit-2017-11-01) for the year. Third-quarter sales were up 1.3% on the year, buoyed by rising directory sales as retail sales fell 7.7%.

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Shares of other retailers fell, with Marks & Spencer Group PLC (MKS.LN) off 4.6% and Primark parent Associated British Foods PLC (ABF.LN) fell 2%.

What's moving markets: Shares of commodity producers strengthened alongside a rise in prices for metals and oil. Copper futures jumped 2% and oil futures climbed more than 1%.

Data released early Wednesday from Caixin showed Chinese factory activity held steady in October, indicating a stable pace of expansion (http://www.marketwatch.com/story/china-caixin-manufacturing-pmi-holds-steady-2017-10-31). Shares of mining companies can be sensitive to economic data out of China, as the country is a major buyer of industrial and precious metals.

Meanwhile, oil prices were trading around two-year highs, supported by talk that members of the Organization of the Petroleum Exporting Countries (https://www.wsj.com/articles/analysts-get-bullish-on-oil-for-first-time-in-6-months-on-opec-hopes-1509516001?mod=mktw) will extend production cuts when it meets next week.

While earnings season remains in full swing, investors are also getting ready for key releases from central banks later this week. They will watch for what the U.S. Federal Reserve is signaling about the path of interest rates when it releases its policy decision after trading closes in Europe Wednesday. And on Thursday, the Bank of England is expected to raise the U.K.'s benchmark interest rate by a quarter-percentage point to 0.5%.

Read:5 things investors need to know as the Bank of England prepares for historic rate hike (http://www.marketwatch.com/story/5-things-investors-need-to-know-as-the-bank-of-england-prepares-for-historic-rate-hike-2017-10-31)

Also: Fed statement may have treats for the hawks and the doves (http://www.marketwatch.com/story/fed-statement-may-have-treats-for-both-hawks-and-doves-2017-10-27)

Oil producer BP PLC (BP.LN) (BP.LN) was up 0.9% and Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) moved up 0.4%.

Economic docket: The pound hit an intraday high after IHS Markit/CIPS said its U.K. purchasing managers index for the manufacturing industry rose to 56.3 in October (http://www.marketwatch.com/story/uk-manufacturing-activity-accelerates-in-october-2017-11-01). That was above a 55.9 FactSet consensus estimate and higher than September's upwardly revised reading of 56.0.

As the fourth quarter got underway, "increased inflows of new work encouraged firms to ramp up production once again," said Rob Dobson, director at IHS Markit, which compiles the survey.

U.K. house prices rose 0.2% in October (http://www.marketwatch.com/story/uk-house-prices-step-higher-in-october-2017-11-01), compared with 0.4% growth the previous month, according to data from the Nationwide Building Society on Wednesday. Prices were up 2.5% on the year, a touch higher than forecasts.

What strategists are saying:

"Another box has been ticked for the Bank of England ahead of a potential interest rate rise," as the British manufacturing sector signaled expansion for the 15th consecutive month in October, said Hamish Muress, currency analyst at OFX, in a note.

"However, comments included within the report around inflation pressures should send a warning signal to the BOE. Whilst manufacturing contributes only a small percentage of U.K. GDP, it is significant that inflation has been mentioned once again alongside the manufacturing data," Muress said. "Ahead of tomorrow's announcement, the Bank of England will have to weigh up inflation pressures for businesses against wage growth restraints for consumers."

Stock movers: Paddy Power Betfair PLC reported underlying earnings grew 7.1% (http://www.marketwatch.com/story/paddy-power-betfair-earnings-rise-lifts-guidance-2017-11-01) in the quarter ended Sept. 30, as it slightly raised its full-year guidance. Shares leapt 4.5%.

Indivior PLC (INDV.LN) shares rallied 9.5%. The pharmaceutical company said Wednesday a U.S. Food and Drug Administration committee has voted to recommend approval of its drug RBP-6000 (http://www.marketwatch.com/story/indivior-opioid-addiction-drug-gets-fda-nod-2017-11-01) for the treatment of opioid use disorder.

Standard Chartered PLC(STAN.LN) slid 6.2% as the Asian-focused lender in its third-quarter results said asset margins are "remaining under pressure." The bank's pretax profit more than doubled to $774 million.

In the mining group, copper producer Antofagasta PLC (ANTO.LN) tacked on 3.1%, Anglo American PLC (AAL.LN) picked up 3.5%, and Glencore PLC (GLEN.LN) rose 3.4%.

(END) Dow Jones Newswires

November 01, 2017 07:36 ET (11:36 GMT)