FTSE hits pre-pandemic levels and EPIC reverses dividend cut

Confirmation US Federal Reserve isn't about to turn off stimulus propels UK stocks higher. Ediston Property (EPIC) rises as retail park investment trust starts to undo last year's dividend cut.

The FTSE 100 hit pre-pandemic levels and the mid-cap index held yesterday’s record high as the US Federal Reserve reassured investors that it will continue to support economic recovery.

While gains failed to match the rises earlier this week, the FTSE 100 climbed 0.28%, or 19 points, to 6,904, its highest level since the end of February 2020 and back to pre-pandemic levels.

The FTSE 250 added just 6 points, or 0.03%, but it was enough to keep the mid-cap index above 22,000, which it topped for the first time in history on Wednesday.

Indices were buoyed by the publication of Fed meeting minutes which revealed the central bank was likely to remain dovish despite a brighter outlook for the economy. Chairman Jerome Powell confirmed the committee would need to see more progress towards ‘maximum employment and price stability goals’ before it changes policy, as the world tries to claw itself out of the Covid-19 crisis.

‘A dovish set of meeting minutes from the Fed has further reassured investors that Powell and the gang won’t be turning off the stimulus taps any time soon,’ said Spreadex analyst Connor Campbell.

Campbell said the strong showing in UK equities was down to ‘selective hearing on behalf of the FTSE, indulging in things like the International Monetary Fund’s revised global growth forecasts, and a general sense of optimism surrounding the UK’s post-Covid-19 comeback’.

However, he said investors were ignoring warnings about ‘a vaccine roll-out slowdown and the blood clot concerns surrounding the use of the Oxford-AstraZeneca jab on under-30s’.

Johnson Matthey (JMAT) sat at the top of the blue chips after adding 3.8%, or 119p, to trade at £32.18. The specialist chemicals group jumped after it announced operating performance will be at ‘the top end of market expectations’ this year and it launched a strategic review of its healthcare arm.

Hargreaves Lansdown analyst Laura Hoy said the group didn’t struggle as much as expected but ‘that doesn’t mean the group can afford to set the cruise control – it has a much larger long-term problem on the horizon’.

She said the firm’s main business is making catalytic convertors but this will become obsolete as the shift to electric vehicles accelerates, forcing it to pivot its business into battery materials and hydrogen fuel cells.

On the FTSE 250, Airtel Africa (AAF) led the mid-caps as its gained 4.3% to trade at 86p ahead of Helios Towers’ takeover of its tower portfolios in four African countries.

SUPP reversal

Schroder UK Public Private (SUPP ), the former Woodford Patient Capital Trust, slid 2% to 34p following a 10% slump yesterday afternoon after slashing its 31 December net asset value (NAV) per share by 20% to 35.01p.

The hit to NAV was mainly caused by a £47m reduction in the valuation of top five holding Rutherford Health, along with smaller decreases in Atom Bank, Industrial Heat, Ombu, Spin Memory, Carrick Therapeutics, Mission Therapeutics and Kind Consumer.

This is a blow for shareholders, wiping out the £52m gain from the sale of Kymab in January. ‘It seems to be a case of one step forwards and two steps back for long-suffering shareholders,’ said analysts at Stifel.

EPIC raises dividend

There was better news from Ediston Property (EPIC ), up 3.8% or 2.6p to 71.8p, after the retail park investor started to reverse last year’s dividend cut by raising the April dividend payable in May by 25% to 5p per share, annualised up from 4p.

The real estate investment trust paid an annual rate of 5.7p before the pandemic and said more rises could come as the retail sector recovers. It anticipated 94% of its first quarter rent would be paid, covering dividends for the first three months by 126% and providing a forward yield of 7.2%.

Analysts at Investec, the trust’s corporate broker, upgraded EPIC to ‘buy’ having cut it to ‘hold’ at the end of 2019. 

‘For EPIC, a significant exposure to retail warehouses has been a drag on sentiment and NAV. However, if the economic recovery gathers momentum, we expect investors to re-focus on the fundamental attractions of this subsector, and its role within the new retail economy. Here, a high proportion of essential tenants, a defensive convenience-led bias and affordable rents, leave the company well-positioned,’ they said.

Schroder Japan Growth (SJG ) eased 1.2p or 0.6% to 210.8p as it reported a 19.9% total return on assets in the half-year to 31 January, ahead of its stock market benchmark’s gain of 17.9%.

 

 

 

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