Wednesday brought good spirits within the European markets that closed in green for the fifth
consecutive day. Meanwhile, the S&P 500 paused near a seven-week high on low volume on Wednesday before the start of earnings reports next week, which investors hoped would provide the catalyst for stocks to advance.
As reported by Reuters, signs of a strengthening economy plus merger and acquisition activity have pushed the S&P 500 close to 1,344, the highest level since June 2008. A meaningful breach of that level could lead to a stocks breakout, pushing prices higher. The market is "basically poised and waiting to see if these (earnings) numbers will support the upside," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco. "It's a consolidation week."
Crossing the Atlantic and generally speaking, European stocks rose on Wednesday, adding to their three-week rally as investors looked beyond the European Central Bank's expected rate rise, brushing aside Portugal's debt woes and piling into recently-hit banks.
The FashionUnited Top 100 Index benefited from this lift, closing up by 6.6 points and reaching the 1204.08 by the close of markets. The benchmark index for Europe, the STOXX 600 ended higher by 0.23% to 281.57, and STOXX 50 ended up by 0.34% at 2635.62.
In the UK, some positive news for the UK retail sector emerged from Marks & Spencer, which announced that overall like-for-like sales were up 0.1%, although this masked a 3.4% drop in non-food sales. The company said it was still experiencing difficult trading conditions, with pressure on disposable incomes combining with higher commodity prices. This will give retailers such as Marks little room for manoeuvre, since it will be unwilling to raise prices to offset higher input costs for fear of losing customers. However, investors were pleased with the overall growth in sales, with poor trading in Ireland and Greece offset by strong growth elsewhere, and the shares were up 4.3% at 354.5p.
Marks helped give other retailers a lift, with Next up 2.8% to 2087p, Burberry rising 1% to 1222p. Nomura keeps its ‘neutral’ rating on luxury brand Burberry, as it thinks that strong momentum is already priced into the shares.
The Japanese broker expects the trading update on 19 April to show a 36% increase in second half retail sales and a 4% rise in wholesale sales, “slower than the third quarter given timing of deliveries,” the broker said. The broker says that Burberry continues to deliver on all points of its strategy and anticipates the update to mark a “great close to a vintage year.” However, with strong growth already assumed, Nomura keep its target price of 1,200p.
Wall Street analysts expect retailers to beat already lowered expectations when they report March same-store sales on Thursday. Overall, the month may likely turn in its first negative sales for the first time after 18 months of straight gains.
However, American stocks were performing well on Wednesday, led by Urban Outfitters, which shares rose 2.6% while Zumiez Inc. was up 3% after Piper Jaffray upgraded both stocks to overweight from neutral. In the same vein, Abercrombie & Fitch Co.’s stock was up 2.3%, a day after the teen retailer laid out a bullish growth plan that called for sales rising to $7.5 billion by 2015.
Abercrombie “remains our favorite idea in the space as we believe the combination of international expansion and domestic recovery will drive above-average earnings growth for the next several years,” said Weeden & Co. analyst Amy Noblin to MarketWatch.