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High street 'cash cow' WH Smith leads UK share rally
by Chris Marshall on Oct 10, 2013 at 09:58
Shares in Europe and the UK rallied on Thursday morning, heading for their first daily gain this week, as investors pinned their hopes on an end to the US budgetary deadlock.
Markets were digesting a trio of US developments: news that president Barack Obama will meet about 20 Republicans in an attempt to end the country’s budget crisis; the president’s nomination of Janet Yellen, a supporter of stimulus, to replace Ben Bernanke as chief of the US Federal Reserve; and the minutes of the Fed’s September meeting showing that members were torn over their decision not to start tapering their bond-buying programme.
Britain’s FTSE 100 followed gains on Wall Street to rise 0.8% to 6,386. France’s Cac and Germany’s Dax rose 1.3% and 0.9% respectively. The gains came even as traders warned that no breakthrough had been made to avert a potential US default in seven days.
The US dollar also recouped some of its losses, to rise against the Japanese yen, euro and pound.
Sterling was down 0.1% to $1.5934 ahead of the result of today’s Bank of England monthly meeting, where no change to policy is expected.
Of London shares, WH Smith (SMWH.L) was the star performer, up 7% to 893p, after the high street stationary and bits-and-bobs chain – which now operates stores in 11 counties outside its domestic market – announced a 6% rise in annual pre-tax profits and said it would buy back £50 million worth of shares. That comes after a buy-back programme on the same scale last year.
Alongside this buyback programme and the ‘High Street cash cow’, Cantor Research’s Freddie George said: ‘We believe the company is entering an interesting development period with its international expansion, which could potentially become a sizeable income stream.’
George reiterated his ‘buy’ call on Smiths shares and upgraded his target price to 950p from 900p.
The firm also raised its dividend by 14% to 30.7p.
SSE (SSE.L) managed a gain of 1.3% to £14.73 after announcing an average of an 8.2% rise in gas and electricity prices for customers.
Few blue chips were trading down, with security company G4S (GFS.L) among the unfortunates, dropping 1% to 236p after being sacked by South Africa's authorities for having ‘lost effective control’ of a maximum security prison.
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