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Burberry in fashion as global growth outlook lifts FTSE

by Chris Marshall on Jan 15, 2014 at 09:51

Burberry in fashion as global growth outlook lifts FTSE

Consumers are splashing out on luxury clothes and advanced economies are turning a corner, was the message to investors from fashion chain Burberry (BRBY.L) and the World Bank respectively on Wednesday morning, sparking a small rally in European shares.

Gains on European indices were spurred by the positive mood in Japan and Wall Street, where much of the previous day’s declines were reversed overnight.

First there was a report on US retail sales topping analyst forecasts to settle nerves. Then the World Bank published an update raising global growth forecasts. It expects global GDP to grow from 2.4% in 2013 to 3.2% this year as ‘advanced economies are turning the corner’.

Though it warned: ‘Growth prospects for 2014 are, however, sensitive to the tapering of monetary stimulus in the United States, which began earlier this month, and to the structural shifts taking place in China’s economy’.

Britain’s FTSE 100 rose 0.3% to 6,790. The blue chip index is now just in the black so far for 2014, up 0.2%, despite some jitters over stock valuations and the tapering of US stimulus.

In London, Burberry was showing that luxury is in demand. The fashion retailer’s shares rose 5.3% to £15.48 after it reported a 14% rise in revenues for the last three months in 2013, to £528 million.

Angela Ahrendts, Burberry chief executive, though ‘confident’, did however have some words of caution: ‘At current levels, exchange rates will be a significant headwind in the second half and beyond, and the macro environment remains uncertain.’

The City was nonetheless impressed, pushing up the shares after a 3% decline so far this year: ‘While we think management change, beauty execution and Japan remain top of investors’ minds in a difficult market environment, Burberry’s digital approach and retail execution should reassure,’ summed up Christopher Walker, an analyst at Nomura, who has a ‘neutral’ rating for Burberry shares.

Stocks closely attuned to the fortunes of the global economy were among the Wednesday morning winners, led by miners including Anglo American ((AAL.L) up 4.5%) and financial companies including Lloyds ((LLOY.L) 1.5% higher).

A couple of blue chips trading without their dividend appeal exerted a small toll, with Ashtead (AHT.L), Imperial Tobacco (IMT.L) and Next (NXT.L) all trading ‘ex-dividend’.

The biggest faller among FTSE 100 shares though was Hargreaves Lansdown (HRGV.L), which dropped 3.5% to £14.55 after announcing its long-awaited new charges for funds investors. The group said the repricing would cost it £17 million over two years and it has to attract £3.5 billion in new business over three years to offset the impact of the lower prices.

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