FTSE hits fresh high as Morrisons delivers cheer

Update: A rally in retail stocks has helped push the FTSE 100 towards another record closing high, as investors were buoyed by a positive update from supermarket chain Morrisons (MRW).

The UK blue-chip index closed 35 points, or 0.5%, higher at 7,731, a new record closing high.

Retail stocks led the way, after Morrisons reported sales growth over the Christmas period ahead of forecasts, sending its shares 2.4% higher to 232.3p.

'The battle between the bulls and the bears continues at Morrisons but it is the shareholders rather than the short-sellers who are raising a glass to the grocer's Christmas trading statement,' said Russ Mould, investment director at AJ Bell.

'A 2.8% increase in like-for-like sales, excluding fuel, in the 10 weeks to 7 January represented the ninth straight period of growth and an acceleration on the prior three-month period, as Morrisons focused on providing growth at the right price in its stores, showed solid growth online and benefited from faster growth in wholesale.'

Morrisons is the seventh most shorted stock in the UK, yet the positive update did not see the 'short squeeze' that can amplify share price gains.

'The only blot on the update is management leaving full-year guidance unchanged,' said Mike van Dulken, head of research at Accendo markets.

'This is preventing the shares from benefiting from the type of short squeeze we saw for Next last week after it not only beat consensus but also upped the mid-point of its full-year guidance.'

Jefferies analyst James Grzinic retained his 'hold' rating on the shares on the news. 

'This should reassure on Morrisons' ability to build further on customer wins. The equity remains at a clear discount to peers, more so when leverage adjusted.'

The news also buoyed rival FTSE 100 retailers. Marks and Spencer (MKS) rose 2.4% to 318.3p, Next (NXT) was up 1.8% at £50.20 and Sainsbury's (SBRY) rose 3.1% to 248.4p.

On the FTSE 250, Just (JUSTJ) was the biggest faller, down 7.5% at 155.2p as private equity group Permira sold a £78.5 million stake in the annuity provider.

Among 'small-cap' stocks, shares in Carr's (CARRC) jumped 10.9% to 137.5p as the agriculture and engineering group issued a positive update.

4imprint (FOUR) was close behind, up 8% at £20.26 as the promotional and corporate gifts printer outlined the boost to earnings from US tax cuts.

Carillion (CLLN) was the heaviest faller, down 12.7% at 20.9p as the troubled construction company said that it was 'not aware of any material developments' that supported the share price rise in recent days. The shares had rallied from around 17p to over 24p last week.