Shares round-up: record for FTSE 100 as FTSE 250 holds above 20,000

The improved mood around UK equities continued today as the FTSE 100 index set a new intraday record at just short of 8,200 and the FTSE 250 held its position above 20,000.

Results-day gains by HSBC Holdings (LSE:HSBA) and Whitbread (LSE:WTB) helped the top flight in another session when London outperformed benchmarks on the Continent. Mid-caps are also enjoying strong support after yesterday’s 1.3% rise for the FTSE 250 index to a 13-month high.

Last week, UBS upgraded its position on UK equities from least preferred to the most preferred in its global strategy. The bank notes the FTSE 100 still trades with a price-to-earnings valuation of 11 times, versus a long-run average of 12.8 times.

• Invest with ii: Open a Stocks & Shares ISA | ISA Investment Ideas | Transfer a Stocks & Shares ISA

UBS economist Dean Turner recommends a broad-based exposure to benefit from the relatively attractive valuations, improving domestic outlook and the UK’s commodity exposure.

He added today: “Three themes in particular stand out to us. First, is to position for a consumer-led recovery amid a resilient labour market and normalising inflation.

“Second, we prefer UK banks to eurozone banks, with the outlook for net interest income improving as we go through the remainder of this year.

“And third, we think under-appreciated UK quality stocks with their high and stable returns, good free cash flow, and solid balance sheets offer attractive upside from here.”

• Lloyds Bank and Aviva part of FTSE 100’s £9bn dividend windfall
• HSBC returns to form in Q1 but CEO quits
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

Today’s improvement in risk appetite benefited shares in Tesco (LSE:TSCO), BP (LSE:BP.) and Diageo (LSE:DGE), whereas on the fallers board the pivot of Prudential (LSE:PRU) towards the savings and investment markets of Asia and Africa continued to underwhelm investors.

Today’s first-quarter new business update left the shares 32p lower at 709.4p, extending this year’s decline to 17% and leaving the Pru below levels seen in the early part of the pandemic.

Comparisons with the previous day’s strong update by bigger rival AIA Group Ltd (SEHK:1299) didn’t help, with the company’s apparent reluctance to announce a share buyback another potential source of disappointment in the City.

Sales rose 7% against strong comparators caused by last year’s reopening of the Hong Kong border, while new business profits of $726 million (£580 million) were a 12% miss versus UBS forecasts.

The FTSE 250 index paused its progress in today’s session, although this masked some strong performances by stocks including Utility Warehouse business Telecom Plus (LSE:TEP).

The company, which helps households save time and money on their essential bills, passed the one million customer milestone after reporting growth of 14.1% in the March financial year. The momentum came against a backdrop of normalised competition and falling energy prices.

Its profits will be towards the top end of the City’s forecast range of £110 million and £116 million, helping shares to continue their recent improvement with a rise of 36p to 1750p.

Peel Hunt sees the potential for shares to revisit the all-time high near 2,500p set in November 2022, noting that a current valuation of 14 times forecast earnings and a projected dividend yield of about 5% looked attractive.

• Stockwatch: an energy stock for better portfolio balance
• 10 hottest ISA shares, funds and trusts: week ended 26 April 2024
• eyeQ: why Legal & General shares could be vulnerable

In the FTSE All-Share, Card Factory (LSE:CARD) rose 7.8p to 108.4p after it declared a dividend for the first time since the suspension of payments in the pandemic. The plan to pay a combined final and interim award of 4.5p a share on 28 June has been made possible after the repayment of Covid-era loans ended restrictions on shareholder distributions.

Revenues of £510.9 million rose 10.3% and adjusted profits by 27% to £62.1 million in the year to 31 January. In addition, the Wakefield-based designer, manufacturer and retailer of greetings cards backed its medium-term ambitions for £650 million of sales, a profit margin of 14% and the net addition of 70 new stores by the end of 2027.

Trading since the turn of the financial year has seen continued positive momentum across card, gifts and celebration essentials, including record trading on the Saturday before Mother's Day.

There was a similar mood of celebration among IG Design Group (LSE:IGR) investors after the greetings card, stationery and Christmas crackers firm upgraded results guidance in a significant boost to its aspiration to return to pre-Covid adjusted operating profit margins of 4.5% by next year.

The AIM-listed shares jumped 35.5p to 157p but analysts at Canaccord Genuity are looking to 325p after increasing their target on strategic progress under a new management team.

The City firm regards today’s update as a potential inflection point that should give the market confidence in the deliverability of future forecasts. Canaccord added: “The current valuation looks anomalous and compelling given the improving margins, combined with forecast cash generation and a strengthening balance sheet. ”