By Shubham Batra and Sruthi Shankar
(Reuters) - UK's FTSE 100 rebounded on Thursday after a weak start to the new year as Next shares touched a record high after the clothing retailer upgraded its earnings outlook and helped outweigh a slump in JD Sports following its profit warning.
The blue-chip FTSE 100 rose 0.5% after two straight days of losses when traders across the globe unwound their bets on aggressive monetary easing this year.
Next jumped 5.8% to the top of the index after the retailer raised its profit forecast for the fifth time in eight months as it reported a better-than-expected rise in Christmas sales.
JD Sports Fashion slumped 23.0% after the sportswear giant issued a warning on its annual profit, citing tepid consumer spending that bruised peak season sales and led to heavy discounting.
JD's profit warning hurt shares of other sportswear makers including Frasers and Germany's Adidas (ETR:ADSGN) and Puma . The FTSE 350 retail sector fell 1.3%, down for an eighth day in a row.
"Given the outsized market reaction seen from today's profit warning from JD Sports, the next few days are likely to be a key test for other UK retailers," noted Michael Hewson, chief market analyst at CMC Markets.
Marks and Spencer (LON:MKS), Primark-owner Associated British Foods (LON:ABF) and B&M European Retail are among the retailers set to release trading updates in the upcoming days.
UK's midcap FTSE 250 index edged up 0.2% after four consecutive days of losses.
While expectations of rate cuts drove double-digit gains in most U.S. and European stock indexes last year, UK equities posted only marginal gains as concerns over domestic economic growth and rising interest rates lingered.
The final S&P Global/CIPS UK Services Purchasing Managers' Index (PMI) showed Britain's economy ended 2023 on a stronger footing than previously thought, easing concerns of a recession.
A separate survey by the British Chambers of Commerce showed companies were a bit more optimistic about sales growth this year after a largely flat 2023, although they remained wary about increasing investment.