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
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Guru Careers: .NET Developer / Web Developer

£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence