Positive updates lift FTSE with Scottish poll in focus, Next stays cautious despite bumper sales, and momentum is building at Barratt

“The FTSE 100 built on yesterday’s gains to reach a new 14-month high helped by positive corporate updates,” says AJ Bell Investment Director Russ Mould.

“Sterling is likely to be in focus over the next 24 hours with the outcome of the Scottish elections front and centre.

“If the SNP can secure the outright majority it says will be a mandate for a second independence referendum then there may be volatility in the pound as the markets factor in a heightened risk of a break-up of the union.

“In the short term sterling weakness would likely give the FTSE 100 a lift, given it boosts the relative value of the overseas earnings which dominate the index.”

Next

“It’s been just over three weeks since non-essential shops reopened in England and we’re now getting a feel for how retailers have fared with their new-found freedom.

“In Next’s case the company has done very well, citing pent-up demand built up over lockdown. However, it doesn’t believe the strong sales growth of the past three weeks is the shape of things to come. That’s a sensible view.

“A lot of people will have built up cash savings during the various lockdowns, so there is the capacity to spend big in the shops. The question is whether people might spend their money elsewhere, given how we’ve already been spending heavily via online channels to have clothes, trainers and other treats delivered home to relieve the boredom of lockdown. Consumers might now prefer to keep their cash for leisure activities and holidays when allowed.

“Next could feasibly get another sales tailwind if more people are called back to work in the office, as there seems a good chance that many people will have put on a few pounds during lockdown and need bigger trousers or shirts.

“For now, the company will just have to focus on running its business efficiently and offer as wide a range of products as possible to keep attracting customers.”

Barratt Developments

“It’s a sell-out – housebuilder Barratt Developments is racing to try and keep up with bumper demand with sales agreed for all of the homes it is set to build for 2021.

“A combination of pent-up demand from lockdown and the stamp duty holiday has stoked an extraordinary post-Covid recovery in the housing market, where the key question is whether or not the good times can continue once state support is dialled back.

“Barratt’s argument is that years of undersupply mean the fundamentals of the market are very robust and from an outside perspective as long as Government initiatives are focused on boosting supply rather than addressing demand, then the housebuilders should continue to enjoy favourable conditions.

“For its part Barratt is doing a good job of taking advantage of the elevated demand while not compromising on quality, notably increasing the volume of properties it plans to build.

“There are at least two clouds obscuring the sunny outlook. One is the availability of mortgages with Barratt noting the difficulty in securing higher loan-to-value loans for new-build homes, the other is raw material costs.

“Barratt is just the latest company from a variety of sectors to note rising input costs – time will tell if management expectations for this to moderate are overly optimistic.

“A strong balance sheet is also allowing Barratt to snap up land at attractive valuations, which should have positive implications for the profitability of future developments.”

These articles are for information purposes only and are not a personal recommendation or advice.


The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.