The FTSE 100 outperformed European indices on Friday as strength in utilities and energy shares helped support the index before investors received positive US inflation data which helped UK stocks extend gains.

The FTSE 100’s tick higher on Friday will help boost investor confidence after a pretty poor week of declines driven by concerns around interest rates.

“After hitting record highs, the UK’s flagship index hit a bit of a wall and investors will be hoping it can now push on to set new all-time highs. Today’s move higher was being powered by gains in the energy sector,” said AJ Bell head of investment analysis Laith Khalaf.

One of the main the economic data points this week was saved for 1.30pm on Friday in the form of US Core PCE – an important indicator used by the Federal Reserve to gauge inflation.

US April Core PCE price index rose 2.8%, meeting expectations, while spending rose slightly less than expected. The data was welcomed by markets because it demonstrated slow pricing pressures, increasing the chances of the Federal Reserve cutting rates over the summer – although it isn’t enough to nail on a rate cut in June.

The FTSE 100 was at session highs shortly before 2pm, up 0.67% to 8,268.

Utilities companies were the best performers as the sector rebounded following a period of heavy selling sparked by National Grid’s right issue. Indeed, National Grid was the highest riser on Friday with a 3.8%. Centrica was not far behind, gaining 3.6%.

JD Sports, down 5.8%, was the biggest faller as investors reacted to warnings of a challenging market. JD Sports spooked investors after operating profit fell 8% in the last year and group sales slipped in the first quarter of this year.

“One of UK retail’s biggest success stories, JD Sports, has found life a bit trickier in recent years and not just thanks to the pandemic,” said Laith Khalaf.

“While its youthful demographic, with some of its customers still living at home, may not have been as immediately impacted by the cost-of-living crisis, ultimately there have been limits on their capacity and appetite to drop hundreds of pounds on the latest set of must-have trainers.

“Fashion is typically cyclical and the athleisure trend, which saw people wear the same clothing for trips to the gym, socialising and relaxing at home, may be starting to sputter having sustained momentum at JD for some time.

“A dip in full-year profit despite higher revenue reflects the cost challenges facing the business and a drop in like-for-like sales in the new financial year, which started at the end of January, is sticking in the craw of investors.”

Graft Polymer share flew on Friday after the biopolymer company it has filed a provisional patent application with the US Patent and Trademark Office related to using its proprietary drug delivery technology for mental health treatments.

Graft Polymer shares were 35% higher at the time of writing.

The application, titled “Composition and methods for mental health disorders using a self-nanoemulsifying drug delivery systems (SNEDDS),” covers using Graft Polymer’s SNEDDS platform to improve the delivery of therapeutics for generalised anxiety disorder, major depressive disorder, post-traumatic stress disorder and other mental health conditions.

Many mental health drug compounds have poor solubility, making effective delivery a challenge. Graft Polymer’s SNEDDS technology aims to enhance bioavailability, pharmacokinetics and stability to address this obstacle.

This patent filing follows the company’s announcement last week that it applied for similar protection for using SNEDDS to deliver addiction treatment drugs. The mental health application is part of Graft Polymer’s strategic shift to focus on healthcare after divesting its industrial plastics manufacturing unit earlier this month.

“We are delighted to announce further progress in leveraging our existing biopolymer intellectual property for additional important healthcare applications with substantial unmet medical needs,” said Anthony Tennyson, Graft Polymer CEO.

JD Sports shares sank on Friday after the company signalled it was facing ‘challenging market’ conditions. Sales dropped last year, and the weakness has continued into the current year.

Readers of the company’s 2024 full-year results were met with the headline ‘Strategic Progress in a Challenging Market’ presented in big bold type at the top of the release.

Investors have focused on the latter half of this statement and dumped shares in early trade on Friday.

“Results came in later than expected and pointed to continued volatility in the market. Underlying profits landed within their previously downgraded guided range, marking an 8% fall from last year,” said Guy Lawson-Johns, equity analyst, Hargreaves Lansdown.

Falling profit will be a real disappointment for investors but this was already largely priced. The assertion the company is operating in a challenging market will do nothing to increase confidence it can bounce back in the year ahead. This did the real damage on Friday.

Indeed, sales fell again in the first quarter, highlighting ongoing softness in demand for premium sportswear. JD Sports did confirm guidance for the year but this has been met with a healthy dose of scepticism given the poor trading results so far this year.

“It also reiterated its guidance for profit to be in the £955-£1,035mn range this year, despite a 6.4% drop in sales in its home market in the first quarter,” Lawson-Johns said.

“Achieving that will be a tall order if challenging markets prevail, but through the store rollout program, the company is taking proactive steps to shape its future.”

“Since joining in 2022, CEO Régis Schultz hasn’t shied away from ambitious expansion plans in North America and Europe. With 200 new stores opened last year and another 200 planned this year, Schultz is clearly focused on growth. Fuelled by £0.5bn of additional capital spend, expansion isn’t coming cheap, but new stores exceeding internal sales expectations by 20% show early signs that the investment is working.

“With growth seemingly not coming quickly enough, the latest billion-dollar Hibbett deal will see the British footwear retailer accelerate its North American growth plans. Adding over 1,000 stores in a key growth market is an attractive proposition, and while the focus on acquisitions may leave little room to increase the dividend, gearing up for future growth could be the best use of capital.”

JD Sports were down 8% at the time of writing.

There is a bit of a renewed buzz in the market concerning the shares of technology products retail group Currys (LON:CURY).

They put on a clear 7.21% gain yesterday, closing up 5.15p at 76.60p, after a massive 7.68m shares were traded.

The sparking of interest came after broker Berenberg upgraded its view of the group’s shares, switching from Hold to Buy, while at the same time lifting its Price Objective from 67p to 90p.

Other City analysts have even higher aspirations for the shares.

Recovery Is Expected

And the reasons are based upon the way the leading omnichannel retailer of electrical products and services is recovering its trading poise.

That was clearly indicated in the middle of May when the group issued a Trading Update for the year to 27^th April 2024, giving the market a guidance that its full year adjusted pre-tax profits will be at least £10m higher than expected coming in the range of £115m-£120m.

The Update suggested that its end of year net cash position will be at some £95m, which compares to the current market value of £868m.

The Business Now

Following the disposal of its Greek interests in April the group is left operating online and through 720 stores in some 6 countries, being the market leader in all of its markets.

In the UK it also operates iD Mobile, its own mobile virtual network, which is a business many of the City whisperers suggest should be either sold off or floated as a separate entity, which could almost double the whole group’s value.

Analyst Comments

Berenberg notes that the group’s improving sales momentum, its expansion of market share and its presence within a significantly depressed, highly discretionary segment of domestic retail, makes it well placed to benefit from a near-term rebound in demand.

“Despite a record of building sales momentum and UK end-market dynamics that are well suited for demand recovery, Currys trades on a significant discount to peers. We expect this discount to diminish as trading momentum continues, indebtedness reduces further and growth accelerates.”

Over at Liberum Capital its analysts applaud the disposal of the Greek stores and its management’s attention to the other parts of its whole business.

Sector specialist Adam Tomlinson concludes that the current valuation remains far too cheap, giving no credit for any further earnings upside even as momentum now turns positive and ahead of macro signs improving.

Management Comment

At the time of its latest Trading Update, its third upgrade in the last year, CEO Alex Baldock stated that:

“Our performance is strengthening, with good momentum in the UK&I, and with the Nordics getting back on track.

Sales are now growing again, margins are benefiting from higher customer adoption of solutions and services, and cost discipline is good.

All this means improved profits and, with our strong cash position, we’re well set up for the year ahead.”

Between now and Thursday 27^th June, when the full year results are due to be published, market views infer that further price rises can be expected.

MicroSalt released its first full-year results as a London-listed company on Thursday and hailed a ‘transformational’ year in which it won contracts with some of the world’s largest food companies.

Given the full year results released today covered the period up until the end of 2023 – when the company was heavily engaged in R&D – there was little of note in terms of financials.

Since listing in London in February, MicroSalt has announced a string of commercial updates demonstrating expansion into new markets and growth in existing markets. We will learn about the financial impact of these developments in the coming reports.

Sales were fairly flat on the prior year in 2023, and, as one would for a company investing in R&D, losses grew slightly.

The big takeaways were the company’s upbeat outlook and insights into relationships with major customers. MicroSalt said key customers were integrating its low-sodium technology into its products, and 2024 would be a key year for orders from new and existing customers.

“This has been a transformational year for MicroSalt and with continued evidence of the timeliness and essential nature of its products as it emerged as a recognised and preferred choice for product reformulation globally,” said CEO Rick Guiney.

“Our geographic outreach is expanding all the time, now with inroads into Asia, Australia, South Africa, the UK, Germany, Canada and Latin America with a resultant boost to our sales pipeline. Furthermore, our consumer products including SaltMe crisps and MicroSalt shakers have successfully provided a low-sodium alternative for households worldwide, cementing our brand as an essential, generation-spanning choice. I am delighted that we can look ahead with the utmost confidence and in eager anticipation of further successes awaiting us”.