Market Report: Next still 'a great company', but at risk of a nasty bump

A blue moon was shining on the retail sector yesterday as bellwether Next was hit with a 'sell' rating.

Veteran analyst Tony Shiret at Espirito Santo thinks "the nature of [Next's] customer base is not properly understood and this will make it vulnerable". Next is more dependent on over 25 mortgage holders than rivals, according to Espirito's analysis, making it most at risk from any rise in interest rates.

The company has also become too reliant on its Directory business, which has offset falling sales in stores. All this means that while Next "remains a great company", it is still at risk of a nasty bump should something not go its way – and investors are failing to price in this risk. Next fell 75p to 6235p.

Escalating tensions in Ukraine saw traders ditch growth stocks. Banks knocked 11.14 points off the blue-chip index, while miners accounted for a 12.19-point slide. The industry was also shaken by rumours that China's GDP growth figures overnight could be weak, sending metal prices tumbling.

Even gold lost its shine: the price fell on good consumer spending data in the US. The numbers piqued hopes of an interest rate rise from the Federal Reserve, which would end demand for gold as a safe bet against the dollar. Fresnillo lost 31p to 901.5p, while Randgold Resources was 118p lighter at 4727p.

Water suppliers United Utilities, up 16p to 769.5p, and Severn Trent, 28p better at 1787p, fared well, as did energy companies: SSE charged up 26p to 1495p, while British Gas-owner Centrica turned 3.1p higher to 342.4p. The FTSE 100 closed 42.15 points lower at 6541.61.

Debenhams jumped 3.45p to 81p despite poor earnings. UBS and Merrill Lynch were cautiously optimistic about prospects, while there was also chatter that Sports Direct owner Mike Ashley, who took a position in the retailer in January, could be gearing up for more activity.

Property consultant Sweett gained some respite from bribery allegations on a hospital project in Morocco as it flagged up results for the year to March "slightly ahead of market expectations", sending shares up 1p to 39.5p.

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