Market Report: Primark's owner suffers from its premium rating

Profit-taking sullied the mood around Associated British Foods last night, with traders booking gains after analysts directed their attention to the chinks in the Primark-owner's armour.

Evolution Securities said that while ABF's updates since December 2009 had been "almost universally upbeat", the most recent statement "was a little more mixed", with the Illovo and Spanish sugar businesses, for instance, proving "a bit weaker than expected". There is also the possibility of margin pressure at Primark, the discount-clothing chain that now accounts for a third of group profits, according the broker.

"Although Primark margins will be up for the year, we are getting slightly concerned about cotton prices, wage inflation and freight costs," Evolution explained, adding that, besides facing tough comparatives in 2011, the chain also had to contend with a "sharp VAT hike in the UK" at the beginning of next year. Though still positive on the long term, the broker said "this is an opportune moment to bank profits" – a call that was heeded by investors, which drove ABF to 1,031p, down 25p.

overall, the market was slightly lower, with the FTSE 100 easing by 10.57 points to 5,148.28 and the FTSE 250 closing at 9,726.48, down 48.83 points, following disappointing economic data from the US. A new report showed that American house builders had turned more pessimistic during July, with a closely watched index of confidence dropping by more than had been expected. The news led to a renewal of anxiety about the sustainability of the recovery in what remains the world's largest economy.

The session had begun on a more positive note. News of renewed talks between International Power, up nearly 11 per cent or 33.2p at 350p, and GDF Suez, and of a Canadian consortium's bid for Tomkins, up nearly 28 per cent or 63.9p at 294.2p, had sparked hopes of an increase in deal activity, driving the FTSE 100 to an intra-day high of 5,196.77. Besides offsetting the impact of a credit ratings downgrade for Ireland, the optimism had also overshadowed the news from Hungary, where weekend loan talks between the centre-right government and representatives from the EU and the IMF ended in failure.

Back with the day's movements, and BP took the FTSE 100 wooden spoon, retreating by nearly 5 per cent or 19.3p to 387.85p amid worries about possible seepage from the recently capped wellhead in the Gulf of Mexico. The stock was also the focus of speculation regarding asset sales, with the market awaiting news on the possible disposal of half of the oil's giant's take in Alaska's Prudhoe Bay oil field.

On the upside, the luxury goods group Burberry rose by 5.5p to 805p after both Nomura and UBS raised their targets for the stock, moving them to 826p and 790p respectively. Both were pleased by the company's decision to buy out its Chinese franchisees and take control of its operations in the fast-growing market, though both stuck to their "neutral" view on the shares. "We believe most of the good news is priced in at current levels," Nomura said.

The banks were mixed as optimism ahead of the results of the EU stress tests began to fade following the release of the US house-building data. Barclays still managed to avoid a fall, adding 0.65p to 285.3p as traders recalled the rally sparked by the conclusion of a similar exercise in the US last year. Royal Bank of Scotland and Lloyds were less successful, however, easing by 0.15p to 43.56p and by 0.34p to 59.27p respectively.

In the wider financial space, bid rumours made a comeback around Man, the London-based hedge fund group. The stock added 2p to 211.4p as speculators, taking their cue from the news around International Power and Tomkins, revisited theories of interest from the Bank of New York Mellon. Further afield, the data-centres specialist Telecity also attracted bid talk, rising by 3.8p to 423.8p on chatter of interest from US peer Equinix.

Elsewhere, house builders were out of favour after a report from the property company Rightmove suggested that house-price growth had weakened during July. Responding to the survey, Howard Archer, chief UK economist at IHS Global Insight, said: "We had expected house prices to be essentially flat overall through the second half of 2010 [but] a modest relapse is looking ever more likely,"

The worries weighed on Barratt Developments, which fell by more than 5 per cent or 5.45p to 93.85p. Taylor Wimpey was more than 4 per cent or 1.1p lower at 24.99p, while Bellway lost nearly 4 per cent or 22.5p to 568p.

electronic payments firm Paypoint was 7p weaker at 343p as profit-taking – the stock rallied by nearly 33 per cent on Friday – offset support from UBS. The broker upped the stock to "buy", citing the National Lottery Commission's announcement that it was "minded" to refuse permission for Camelot to move into bill payments and mobile-phone top-ups – something that would have been a "substantial threat to Paypoint".

UBS said that while a final decision was not due until September, it saw a low probability – 10 per cent, in the broker's view – of the Commission siding with Camelot.

Suggested Topics
Emma Watson has become the latest target of the 4Chan nude hacking scandal
peopleThreats follows actress' speech on feminism and equality at the UN
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
Life and Style
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
John Terry, Frank Lampard
footballChelsea captain sends signed shirt to fan whose mum had died
Arts and Entertainment
Rita Ora will replace Kylie Minogue as a judge on The Voice 2015
Life and Style
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Life and Style
Arts and Entertainment
Tennis player Andy Murray's mum Judy has been paired with Anton du Beke for Strictly Come Dancing. 'I'm absolutely delighted,' she said.
tvJudy Murray 'struggling' to let Anton Du Beke take control on Strictly
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
David Moyes and Louis van Gaal
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

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits