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
Voices
The Sumatran tiger, endemic to the Indonesian island of Sumatra, is an endangered species
voicesJonathon Porritt: The wild tiger population is thought to have dropped by 97 per cent since 1900
News
The Swiss Re tower or 'Gherkin' was at one time the UK’s most expensive office when German bank IVG and private equity firm Evans Randall bought it
news
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
Sport
Van Gaal said that his challenge in taking over Bobby Robson's Barcelona team in 1993 has been easier than the task of resurrecting the current United side
football
PROMOTED VIDEO
Arts and Entertainment
The Great British Bake Off 2014 contestants
tv
Arts and Entertainment
filmThe Battle of the Five Armies trailer released
News
news
Arts and Entertainment
Beast would strip to his underpants and take to the stage with a slogan scrawled on his bare chest whilst fans shouted “you fat bastard” at him
musicIndie music promoter was was a feature at Carter gigs
Arts and Entertainment
Story line: Susanoo slays the Yamata no Orochi serpent in the Japanese version of a myth dating back 40,000 years
arts + entsApplying the theory of evolution to the world's many mythologies
Extras
indybest
News
Performers dressed as Tunnocks chocolate teacakes, a renowned Scottish confectionary, perform during the opening ceremony of the 2014 Commonwealth Games at Celtic Park in Glasgow on July 23, 2014.
news
Life and Style
Popular plonk: Lambrusco is selling strong
Food + drinkNaff Seventies corner-shop staple is this year's Aperol Spritz
Life and Style
Shake down: Michelle and Barack Obama bump knuckles before an election night rally in Minnesota in 2008, the 'Washington Post' called it 'the fist bump heard round the world'
newsThe pound, a.k.a. the dap, greatly improves hygiene
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Senior Fund Administrator - Edinburgh - £22 p/hr

£20 - £22 per hour + competitive: Orgtel: Senior Fund Administrator, Top Four ...

Entry Level Fund Accountant (Edinburgh)

£17 - £20 per hour: Cameron Kennedy Recruitment: My client, one of the worlds ...

SQL DBA/Developer

£600 per day: Harrington Starr: SQL DBA/Developer
 SQL, C#, VBA, SQL Server, ...

Risk Analyst - VBA/EXCEL

£300 - £600 per day: Harrington Starr: Risk Analyst Access, EXCEL, VBA, RISK, ...

Day In a Page

The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
Countries that don’t survey their tigers risk losing them altogether

Countries that don’t survey their tigers risk losing them

Jonathon Porritt sounds the alarm
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz
A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on