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Scottish Mortgage leads FTSE higher after US rally

Scottish Mortgage leads FTSE higher after US rally

Scottish Mortgage (SMT) has jumped towards the top of the FTSE 100 after a big rally in US markets overnight, led by the technology sector.

Shares in the global investment trust, which were hit hard by last week's stock market sell-off rose 2.7% to 497.6p, towards the top of a rallying FTSE 100, up 23 points at 7,083.

US markets jumped overnight, with the Dow Jones and broader S&P 500 both up 2.2% and the technology-heavy Nasdaq jumping 2.9%.

American investors were buoyed by a series of upbeat earnings reports from major companies, with technology stocks leading the gains.

'The big question after yesterday's move is whether US earnings season is coming to the rescue of markets,' said Jim Reid at Deutsche Bank.

'As earnings season accelerates into its busiest portion of the calender, the reports out yesterday boosted sentiment, with positive news from the healthcare, financial, tech and transport sectors.'

A much-anticipated update from streaming service Netflix (NFLX.O) released after the market close meanwhile dispelled fears of a growth slowdown, sending the shares 11.4% higher in pre-market trading.

Netflix is the eight biggest holding in Scottish Mortgage's portfolio, representing 3.1% of the £8.6 billion investment trust.

Neil Goddin, Citywire A-rated manager of the Kames Global Equity fund, said the streaming service was 'shooting for the moon'.

'White it disappointed the market previously, the real reason for the sell-off was out of its control - a weakening of bond yields, which has led to investors dumping growth stocks in general,' he said.

'If anything it offers a good buying opportunity to investors. We think the future looks rosy for companies like Netflix - at the expense of traditional media - as consumers demand more control and better value content.'

Pearson (PSON), a longstanding holding for Citywire AA-rated Nick Train, meanwhile jumped 3.8% to 848.8p as the heavily-shorted educational publisher said it was on track for a return to profit growth in 2018.

On the FTSE 250, shares in Mediclinic (MDCM) tumbled 20.2% to 378.9p after the private hospital group flagged an 8% drop in core profit in the first six months of the year.

A bounce-back for growth stocks meanwhile buoyed the shares in technology-focused investment trusts and a number managed by growth-focused fund group Baillie Gifford, which runs Scottish Mortgage.

Allianz Technology (ATT) rose 5% to £14.59 while Polar Capital Technology (PCT) was up 2% at £12.22.

Among Baillie Gifford trusts, Edinburgh Worldwide (EWI) was up 4.2% at 888p, Baillie Gifford US Growth (USA) rose 2.6% to 124.8p and Baillie Gifford Japan (BGFD) traded 1.5% higher at 813p.

Biotech trusts also jumped. International Biotechnology (IBT) was up 3% at 626p and Biotech Growth (BIOG) rose 2.4% to 760p.

On the Alternative Investment Market, shares in Asos (ASOS) surged 13.1% to £56.54 after the online fashion retailer talked up 'huge' potential after hitting sales growth forecasts for the year.

Russ Mould, investment director at AJ Bell, said investor relief was leading much of the jump.

'Investors have clearly been nervous about the retail sector this year, given profit warnings from the likes of Quiz (QUIZ), Superdry (SDRY), Moss Bross (MOSB), Footasylum (FOOT) and more in recent months,' he said.

'The fact that Asos has not only met financial expectations but also maintained future earnings guidance is enough to win back the market's favour.'

The stock is a favourite for a number of growth focused UK stock pickers. Funds boasting a top 10 holding in Asos include Allianz UK Mid-Cap and Baillie Gifford UK Equity Alpha.

On the FTSE Fledgling index, shares in Flybe (FLYB) took a dive, tumbling 39.8% to 19.4p as the airline warned full-year profits would miss expectations.

'Budget airline Flybe has had an awful year so far and today we've seen record lows in the share price,' said Michael Hewson, chief market analyst at CMC Markets UK.

'Despite focusing on its more profitable routes the turnaround doesn't appear to be happening fast enough.'

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