By Sarah Turner

LONDON (Dow Jones)--Supermarket firms gained in London on Tuesday after William Morrison released a well-received trading update.

Shares of William Morrison climbed 8.2%, with the company the top percentage gainer in FTSE 100 action.

William Morrison said a strong start to the year continued though the second quarter and it's now expecting fiscal-year results to top market expectations, which the company said was for underlying profit before tax of 664 million pounds.

Gross margin for the full year is now expected to exceed a previous target by around 40 basis points, it said.

Analysts at Numis Securities said that a 40 basis-point margin improvement implies an upgrade of 50 million pounds ($82 million) to forecasts.

"After 18 months of comparable sales outperformance we finally see some operating leverage come through Morrison's P&L," the broker said. "We remain neutral on the stock, preferring Tesco, but, with more to come, would not want to be short," the analyst added.

Of rivals, Tesco shares climbed 1.4% and J. Sainsbury shares advanced 3.1%.

Overall, the U.K. FTSE 100 index rose 0.9%, or 37.55 points, to 4,481.77, marking the seventh straight session of gains for the index.

Other European shares were also higher, while U.S. stocks were steady as the London market closed.

Other sectors gaining ground in London on Tuesday included mineral extractors, with shares of Anglo American rising 4.1% and Fresnillo up 4%.

Banks were weaker, however, with HSBC Holdings falling 1.6% and Barclays down 1.2%.

Shares of fashion retailer Next traded down 1.6%, paring some recent gains.

Next brought forward its trading update by one week and said that 25-week total retail sales rose 1.4% while catalog sales rose 1.1% after hot weather boosted sales. Comparable sales declined 1.9%, on track to beat analyst forecasts.

The firm added 15 million pounds to its internal first- and second-half profit forecasts.

"We feel the positive undertones of today's statement were already in the price and, given the expected deterioration in comparable earnings, we would encourage investors to take profits," said analysts at Killik & Co Stockbrokers.

Shares of bookmaker William Hill fell 4.2% after software developer Playtech said in its trading update that their joint venture William Hill Online had a slower-than-anticipated start to the year due to a prolonged integration period and difficult trading conditions.

Playtech said its fiscal-year performance will now fall below current market expectations, sending its shares down 24.2%.

William Hill said in a separate update that it remains comfortable with consensus expectations for its online business and will provide more information with results due out Aug. 4.

-Sarah Turner; 415-439-6400; AskNewswires@dowjones.com