Market Report: Chill winds blow through retail sector

The already shaky high street was dealt a fresh blow yesterday as UBS downgraded the entire European retail sector in a note titled "Running out of steam". Analysts said that while the markets are rallying, it means it's harder for retailers to outperform.

FTSE 250-listed Debenhams led the race to the bottom as the department store warned that first-half sales would come in below expectations due to snow in January. It came crashing down 13.9p to 80.7p.

Home Retail Group, owner of Argos and Homebase, also suffered as UBS downgraded its shares, losing 4.6p to 121.7p. Even Next, often thought of as a steady bet because of its catalogues business, wasn't spared UBS's red pen. Analysts downgraded it to "sell" over weak growth prospects and left Next discounted 106p at 4,141p.

There was more bad news in the banking sector, with shares falling on the news that banks have been lending less despite the Bank of England's cheap money scheme and a warning from the UK's banking watchdog that the PPI mis-selling scandal is set to rumble on for years.

Barclays lost 3.05p to 300.4p and Royal Bank of Scotland was down 7.1p to 306.9p, but the biggest faller was Lloyds. Ian Gordon at Investec noted that "Santander UK and Lloyds jointly delivered £18bn of negative net mortgage lending in 2012," and said the 61p share valuation that chief executive Antonio Horta-Osorio publicly aimed for last week isn't on the horizon. Lloyds slumped 1.95p to 51.3p.

HSBC also fell after unveiling a set of disappointing numbers. Despite full-year pre-tax profits of £13.7bn, the figure was down 6 per cent from last year and below market expectations. The bank dropped 18.1p to 710p.

Finally, tighter property regulation in China was bad news for the mining sector, which has thrived off the Red Dragon's resources-consuming property boom. Late on Friday China's cabinet voted to increase loan rates for buyers of second homes and ruled in favour of a 20 per cent income tax on home sales in areas where prices are rising too fast in an attempt to curb property speculation.

The moves sent shockwaves through the mining sector, due to fears it will lead to a slowdown in development. Rio Tinto, Anglo American and Kazakhmys were among the day's biggest fallers.

The bad news across the index dragged the FTSE 100 down 32.97 points to 6,345. But a few risers provided the silver lining for the clouded market. Outsourcing was in vogue, with Bunzl and Capita among the day's best performers. Bunzl jumped 24p to 1,310p as the company announced it had acquired the Brazilian medical distributor Labor Import Comercial Importadora Exportadora.

Meanwhile Capita put on 25.5p to 884p, with Berenberg and Jefferies saying the group was showing clear signs of recovery after three tough years.

Utility stocks were also in demand. Société Générale upgraded British Gas owner Centrica to a "buy", with SocGen's Ashley Thomas saying the energy giant's £500m share buyback programme and new gas storage developments offered promising opportunities. Centrica put on 6.3p to 361.4p.

The water supplier Severn Trent saw a steady stream of trades add 8p to 1,628p as Barclays upped its verdict to overweight, and the electricity supplier SSE jolted up 12p to 1469p.

The Worcestershire-based car and aeroplane parts maker GKN was another winner, up 6.5p at 275.9p, after Goldman Sachs rated it "neutral", up from "sell".

Sir Martin Sorrell's advertising behemoth WPP saw its shares rise 13p to 1,071p after acquiring the Toronto-based agency John St. Traders were cautious over TalkTalk as the telecoms company unveiled a new financial director, ex-Umbro FD Stephen Makin, following the exit of Amy Stirling. but its shares remained unchanged at 251.8p.

On AIM, the mini-mining and commodities firms weren't hit by the uncertainty in China. The Indonesian gold miner Archipelago Resources put on 0.75p to 55.75p after solid exploration results released last Friday and pledging yesterday to pay out 10 per cent of its operating cash flows in dividends. The Latin American copper exploration company Metminco also performed well, adding 0.005p to 0.044p after releasing positive results of a mining scoping study at its flagship copper project in Peru.

Buy: Reed Elsevier

Despite its, surely undeserved, reputation for being dull, Reed Elsevier is drawing in admirers and Investec recommends we fill our boots with its shares. The broker says the New Scientist publisher "is a top blue-chip play, benefiting from strategic and systematic portfolio refocus", and "very attractive in the long term". It has an 800p target on its shares, which closed at 719p.

Sell: Anglo American

Ditch shares in mining giant Anglo American, says Nomura. The broker notes that "positivity for [Anglo American] appears to largely hinge around the new CEO Mark Cutifani", but points out that Mr Cutifani doesn't start till April. Investors are hyping themselves up, says Nomura, predicting how Mr Cutifani might unlock value while ignoring the company's difficult track record. Nomura recommends a reduction, putting a 1,700p a share target on shares which closed at 1,849p.

Hold: Kofax

Panmure Gordon urges us to hang on to shares in Kofax with a warmth rarely witnessed in a note. "Hope springs eternal," the broker says of the scanning software company, applauding its acquisition of Altosoft as a "nice little transaction". It adds there is "execution risk" but raises its target from 290p to 294p for shares in the California-based company, which stand at 288p.

Suggested Topics
Life and Style
Arts and Entertainment
Up my street: The residents of the elegant Moray Place in Edinburgh's Georgian New Town
tvBBC's The Secret History of Our Streets reveals a fascinating window into Britain's past
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
Luis Suarez looks towards the crowd during the 2-1 victory over England
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
Arts and Entertainment
Jamie Dornan stars as Christian Grey in the Fifty Shades of Grey movie
filmFirst look at Jamie Dornan in Fifty Shades of Grey trailor
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Junior Research Analyst - Recruitment Resourcer

£18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...

Senior Analyst - Financial Modelling

competitive: Progressive Recruitment: This really is a fantastic chance to joi...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform