Market Report: Good news sends investors swooping on Kingfisher
Tuesday 18 October 2011
Investors had a day of popping Kingfisher, the owner of the DIY retailer B&Q, in their shopping basket yesterday after its chief executive made upbeat comments about the group's prospects at the weekend. Ian Cheshire struck a confident tone on Kingfisher's French businesses, Castorama and Brico Depot, and reaffirmed his plans to save hundreds of millions of pounds with a significant increase in group sourcing over the next three years. Kingfisher, which has nearly 900 shops in eight countries from Turkey to China, rose by 4p to 259.9p, continuing its recent recovery from a lull of 217p in early August.
In a newspaper interview, Mr Cheshire said Kingfisher was benefiting from a growing DIY trend in France, which is now its biggest operation both in terms of profits and sales. Despite the tough consumer spending environment in the UK, the group grew half-year profits by 24 per cent to £439m over the six months to 30 July.
Indeed, Kingfisher was one of small number of risers on the blue-chip FTSE 100 index yesterday, which fell by 29.9p to 5,436.7, as fears about the eurozone debt crisis resurfaced. Its fellow retailers Marks & Spencer and Sainsbury's also scraped into positive territory. M&S was up by 2.5p to 334.9p ahead of its unveiling half-year results on 8 November. Sainsbury's, the UK's third-biggest grocer, also continued to make up ground, rising by 1.6p to 300.3p, although it has lost more than 20 per cent of its value in the year to date.
Like its big rivals Tesco and Wm Morrison, Sainsbury's is battling its toughest trading environment for a generation. Investors have been piling back into Sainsbury's since its shares sank to 258p last month, partly in the belief that the company can continue to fight its rivals on price and grow its profits. However, Ocado, the FTSE 250 online grocer, had another day to forget as its shares fell by 2.4p to 87.6p, a wafer above an all-time low.
Across the FTSE 100, the biggest winner yesterday was the oil giant BP, which surged 9.15p to 425.55p after a $4bn settlement with Anadarko Petroleum, the part-owner of the oil well involved in the Gulf of Mexico disaster last year. Anadarko has agreed to pay BP to settle all claims relating to the spill at the Macondo well.
The second-biggest riser on the blue-chip index was Man Group, the hedge fund manager, as investors returned to the stock following a dreadful run. Man Group – whose shares have tumbled more than 30 per cent in the past month – rose by 3.2p to 160.8p. While Man Group would certainly benefit from more stability in Europe, hopes for a far-reaching rescue package for the region's sovereign debt crisis faded yesterday after comments from the German Finane Minister Wolfgang Schäuble.
The leading European indexes – the FTSE 100, France's Cac 40 and Germany's Dax – started buoyantly in positive territory but fell after Mr Schäuble warned that this weekend's euro summit would not deliver a definitive solution.
His comments appeared to knock sentiment surrounding Royal Bank of Scotland, which is 83 per cent-owned by British taxpayers. RBS, which has exposure to debt-crippled countries such as Greece through Greek bonds, fell by 2p to 24.1p. While it has less exposure to Europe than RBS, Lloyds Banking Group also had a day to forget and fell by 8p to 32.4p.
Given that Lloyds is the most exposed of the big banks to the ailing British economy, dire forecasts on domestic economic output by the Ernst & Young Item Club are likely to have weighed on Lloyds far more. The well-respected forecaster said yesterday that the eurozone debt crisis had in effect brought the UK's economic activity to a standstill and predicted growth of just 0.9 per cent for 2011.
Despite these headwinds, however, Barclays managed to edge up by 3p to 176.4p yesterday, reflecting the bank's broader international reach.
Topping the leaderboard for the biggest losers yesterday was G4S, the British security company, which said it had agreed to acquire Denmark's ISS in a £5.2bn deal. G4S's shares fell by 62.4p to 219.9p, reflecting the dilutive impact of it partly funding the deal though a fully underwritten £2bn rights issue.
On the FTSE 250, the biggest loser was the travel company Thomas Cook, which has been hit by the parlous state of consumer spending. On another day to forget, the tour operator tumbled by 2.7p to 46.6p, although the exact reasons for its being the biggest faller on the FTSE 250 were unclear.
One company not reliant on the vagaries of the British consumers Amec, the international engineering business, whose shares rose by 15p to 875p last night after it announced that it had won a major new deal.
BP and its partners, Shell, ConocoPhilips and Chevron, have awarded Amec a contract for the main platform design at an oilfield west of the Shetland Islands.
FTSE 100 risers
Whitbread 1627p 728p (up 12p, 0.7 per cent) The owner of the Costa Coffee and Premier Inn chains was in vogue ahead of its interim results today, which are expected to show strong growth.
Compass Group 554p (up 1p, 0.8 per cent) Catering services giant has been one of the best-performing shares over the last year and continues to benefit from investors seeking safety in its global reach.
FTSE 100 fallers
Serco Group 499.5p (down 16.5p, 3.2 per cent) International services company was knocked by rival G4S's £5.2bn acquisition of ISS, as investors fretted over the growth prospects for the security sector.
l Burberry 1262p (down 32p, 2.5 per cent) Despite growing revenues and profits, the luxury brand gave up recent gains as investors appeared to continue to worry about growth in China.
FTSE 250 risers
Sports Direct 231.9p (up 1.9p, 0.8per cent) Investors pile into sportswear retailer ahead of its pre-close statement tomorrow. Its shares have soared in the past year, as it has grown profits and benefited from problems at rival JJB.
Premier Foods 4.8p (up 0.3p, 6.3 per cent) Supermarket food supplier receives a boost from opportunistic purchasing, despite its poor trading and debt mountain.
FTSE 250 fallers
Carpetright 495.2p (down 19.8p, 3.8 per cent) Floor covering retailer was hit by further gloomy economic forecasts. The UK market leader has issued a string of profits warnings in the past year as households cut back on big-ticket spending.
Rightmove 1248p (down 33p, 2.6 per cent) Property website pointed to growing north-south divide in the housing market as it faces increased competition from rivals.
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