LONDON MARKET OPEN: Burberry and Berkeley bookend blue-chips

(Alliance News) - The FTSE 100 opened Friday's session on the back foot, helped by a weaker pound even as figures showed the UK economy contracted less than feared at the start of the year.

Luxury fashion brand Burberry topped the blue-chip index in early trade while housebuilder Berkeley was the worst performer.

"Following another record close from the Dow Jones and DAX on Thursday, the European markets started Friday with an air of hesitation," said Connor Campbell at Spreadex.

The FTSE 100 index was up 4.34 points, or 0.1%, at 6,741.30 early Friday. The mid-cap FTSE 250 index was down 43.55 points, or 0.2%, at 21,489.55. The AIM All-Share index was down 0.2% at 1,195.55.

The Cboe UK 100 index was up 0.1% at 671.25. The Cboe 250 was down 0.2% at 19,110.14, and the Cboe Small Companies up 0.2% at 13,822.62.

In mainland Europe, the CAC 40 in Paris was down 0.1% while the DAX 30 in Frankfurt was down 0.5% early Friday.

In London, Burberry surged to the top of the FTSE 100, up 7.5%, as it tipped full-year revenue and profit to beat market forecasts.

Burberry expects comparable store retail sales in the quarter ended March 27 to be between 28% and 32% higher annually. For the full-year, revenue is to decline between 10% and 11% from GBP2.63 billion.

"Since December, we have continued to see a strong rebound and now expect revenue and adjusted operating profit to be ahead of consensus expectations," Burberry said.

According to company-compiled consensus, Burberry is to post adjusted operating profit between GBP218 million and GBP352 million. The consensus average is GBP301 million, which is a quarter lower than the GBP404 million Burberry achieved last year.

Housebuilder Berkeley tumbled 4.8% as it cautioned that the value of reservations for the current financial year will be around 20% lower than last year.

The FTSE 100-listed property developer said it expects profit for the year to the end of April to be around GBP504 million, broadly flat year-on-year, and forward sales are anticipated to be above GBP1.7 billion at the year-end.

Berkeley noted that the market fundamentals remain strong, with low interest rates. Sales reservations have been "robust" where the company has had availability of stock.

The Cobham, England-based company, however, noted that it has decided to postpone the launch of new developments and phases into the market until the economy opens up post-lockdown, despite enquiry levels remaining "consistently strong". Berkeley said it anticipates the value of reservations for the current financial year to be around 20% lower than last year.

Elsewhere in the FTSE 100, Barclays shares rose 3.1% after Goldman Sachs upgraded the lender to Buy from Neutral.

In the FTSE 250, Hammerson shares bounced 5.9% despite a tough year for the shopping centre owner.

Hammerson reported EPRA net tangible assets of 82p per share as at the end of 2020, down 29% respectively on 116p at the end of 2019.

Hammerson said it was "hit hard" by the pandemic.

"The retail sector, already in the grip of major structural change, has been significantly impacted by the restrictions imposed to tackle the pandemic, and we've also seen an increasing number of retail failures. Combined, this has resulted in the largest fall in net rental income and UK asset values in the Group's history," said Chief Executive Rita-Rose Gagne.

Net rental income slumped 49% to GBP157.6 million, tumbling 41% on a like-for-like basis, excluding premium outlets.

In Asia, the Japanese Nikkei 225 index closed up 1.7% Friday. Against the yen, the dollar rose to JPY109.02 versus JPY108.51.

The S&P/ASX 200 in Sydney gained 0.8%.

In China, the Shanghai Composite was up 0.5%, while the Hang Seng index in Hong Kong ended down 2.2%.

The EU on Thursday warned China it could take "additional steps" as it condemned a vote by Beijing's rubber-stamp parliament for sweeping changes to Hong Kong's electoral system.

The US also criticised the move, accusing China of stifling democracy in Hong Kong.

A Beijing official in charge of Hong Kong policy told reporters Friday the "chaos" of recent years showed that the city's electoral system has "clear loopholes and shortcomings". Alongside the national security law, the move represents "a combination of punches, to...effectively manage the ongoing chaos", said Zhang Xiaoming, of the Hong Kong & Macau Affairs Office.

The UK economy weathered the lockdown restrictions imposed at the start of 2021 better than expected.

The economy contracted 2.9% month-on-month in January, a far better performance than market consensus, according to FXStreet, of a 4.9% decline. This followed 1.2% monthly growth in December.

UK Prime Minister Boris Johnson at the start of 2021 imposed the toughest national lockdown in England since March of last year, shutting schools, non-essential shops and restaurants.

Sterling was quoted at USD1.3952 after the data, weakening from USD1.3970 at the London equities close on Thursday.

Meanwhile, the euro traded at USD1.1946 early Friday, lower than USD1.1960 late Thursday, after German annual inflation for February was confirmed at 1.3%. The pace of inflation quickened from 1.0% in January.

The economic events calendar to come on Friday US producer prices at 1330 GMT.

Gold was quoted at USD1,709.36 an ounce early Friday, lower than USD1,722.35 on Thursday. Brent oil was largely unchanged at USD69.29 versus USD69.32 late Thursday.

By Lucy Heming; lucyheming@alliancenews.com

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