Market Report: M&S smartened by womenswear hopes

Has Marks & Spencer’s chief executive Marc Bolland finally got womenswear right? He has faced increasing pressure to stem eight straight quarters of declining clothing sales at the one-time retail bellwether.

Many see womenswear as key, and the forthcoming autumn/winter season may be the chief executive’s last chance to turn the division around.

The high street chain has just unveiled its new advertising campaign, entitled Meet Britain’s Leading Ladies, for next season’s collection. Shot by the acclaimed photographer Annie Leibovitz, it features actress Dame Helen Mirren, artist Tracey Emin, author Monica Ali and Olympic champion boxer Nicola Adams among others.

Clearly Mr Bolland is throwing everything he’s got at womenswear, and investors certainly liked what they saw – Marks & Spencer was among the day’s biggest movers, adding 6.2p to 459.5p.

After Rightmove reported that the recovery in the UK housing market was continuing apace despite a recent monthly dip in asking prices, traders decided it was a good time to look at the company. Rightmove added 100p to 2,364p. But housebuilder Persimmon, which reports first-half results today, took a battering after a strong set of numbers from rival Bovis. Persimmon fell 21p to 1,167p.

Following a second week of losses on the benchmark index, the FTSE 100 remained largely flat yesterday, with no major economic data and continued low summer volumes.

Traders are still holding their breath over fears that the US Federal Reserve may scale back market stimulus in the US next month. Ankit Kapur, a sales trader at CMC Markets UK, said: “It appears that everyone in the City is still either asleep or on holiday, with low trading volumes and a blank macro-calendar unlikely to stir anyone into action. We all wait for Wednesday’s Fed minutes and any clues on the potential scale of the tapering plan that the market now seems convinced will begin in September.” The index closed down 34.26 points at 6,465.73.

Monday merger talk helped keep shares moving, with the biopharmaceuticals company Shire and the oil and gas engineer Kentz both targets of takeover bids. Shire added 24p to 2,409p after reports that it has hired Lazard to defend against a possible takeover bid. Kentz led the mid-cap index after rejecting a bid from Amec. It jumped more than 24 per cent, adding 115.1p to 591p.

The Cambridge-based microchip maker Arm Holdings made gains yesterday. The company, whose chips are used in Apple and Samsung’s smartphones and tablets, added 19p to 889p.

People were keen to dump the mining behemoth Glencore Xstrata ahead of today’s first-half results. News emerged that the recently merged commodities giant is expected to write down assets inherited from Xstrata by as much as $7bn (£4.5bn). Glencore Xstrata tumbled 6.4p to 301.95p.

The wider mining sector continued to drag on the index, with Anglo American down 55p to 1492.5p, Fresnillo dropping 15p to 1157p and Randgold Resources losing 105p to 5045p.

Vodafone fell following news of a previously unreported multi-million-pound settlement with HMRC over the tax paid by an Irish subsidiary. The telecoms major slipped 2.45p to 189.85p.

Mike Dennis at Cantor Fitzgerald was enthusing over Tesco yesterday, issuing two notes on the supermarket chain. He thinks reports the retail giant is considering launching its own tablet device this Christmas are good news for investors, and should help Tesco exploit recent technology acquisitions Blinkbox, Mobcast, We7.

In his second note, Mr Dennis highlighted Eastern opportunities. He reckons the time is right for Tesco to exploit the weak rupee and make a push into India, while in Hong Kong he advises the supermarket to get a slice of the recently announced $3.5bn sale of retailer Parknshop. But Tesco, which was yesterday hit with a £300,000 fine for a misleading offer on strawberries, fell 2p to 366.3p.

GlaxoSmithKline dropped 10p to 1,645p as it was named Citi’s least-preferred stock, with Andrew Baum saying the success of two late-stage drugs looks doubtful.

But investors saw value in budget airline easyJet after its battering last week, and sent it flying up 10p to 1,267p.

Buy

Spirit Pub

Spirit’s financial year ended on Saturday and scribblers at Panmure Gordon think the pub group’s likely to have hit market expectations thanks to a strong fourth quarter. “The group therefore starts [financial year] 2014 with encouraging momentum and with consumer confidence at a three-year high,” say analysts at the broker. They reiterated their buy rating and gave the shares, currently at 73p, a target price of 110p.

Sell

Royal Bank of Scotland

The state-backed Royal Bank of Scotland isn’t looking like a good bet, according to analysts at Espirito Santo. A consortium of bidders has put together a £1.5bn bid for 316 RBS branches, higher than the previously mooted price of £0.8-1.0bn. But the bid “still falls short of the initial collapsed sale to Santander, which was valued at £1.65bn,” said the broker. What’s more, the sale will not be realised until next year. The broker advises investors to sell, giving a target price of 343p for the shares, which are at 339.9p.

Hold

Bovis

Bovis’s 50 per cent rise in profits is “not to be sniffed at”, say market watchers at Peel Hunt. The housebuilder has hit 90 per cent of its annual sales target already. But the key now is getting the most out of its assets to increase the return on equity, says the broker. It sees little evidence of this in yesterday’s report but is hopeful for the period ahead. Peel Hunt gives a hold rating, with a target price of 890p for shares that closed at 765p.