Market Report: Retailers drag the markets back to earth

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The Independent Online

JJB Sports and Sports Direct International were no doubt among those cheering loudest on Wednesday night when England thumped Croatia 5-1 to reach the World Cup finals in South Africa.

Both blamed England's lamentable failure to qualify for last year's European championships, and the subsequent drop in football shirt sales, for some very poor numbers. However, just as things seemed to be getting better, the Serious Fraud Office said it would be investigating the two groups over fraud and price-fixing allegations. JJB's share price dropped by as much as 17.4 per cent at one stage, but recovered to 34.75p by the end of trading, a drop of 10.3 per cent, while Mike Ashley's Sports Direct plummeted by 16.3 per cent to 108.9p.

One trader said the recovery of JJB's share price indicated that the initial sell-off was a kneejerk reaction. "JJB is probably going to be OK throughout this investigation," he added. "The company seems to have been as helpful to the investigation as possible, and companies usually get credit for that. We reckon the stock has been oversold, probably to the tune of about 10 per cent."

Clearly suffering something of a hangover from Wednesday's euphoric breaching of the 5,000 points mark, the FTSE 100 resembled something like the day after the Lord Mayor's Show as it struggled to hit the milestone again. The market ended the day at 4,987.68, a 0.33 per cent fall.

Despite yesterday's nervous reaction to getting beyond the sacred 5,000 barrier, those at Capital Spreads argue there is still some juice left in the market. "There is a certain amount of profit-taking from our clients but they are still shy of getting too bearish at these new highs (quite rightly yesterday) as the momentum of the slow grind higher seems to be showing no signs of easing just yet," they said.

"Right on the open the FTSE futures index spiked up to 5,040 as, presumably, weak shorts were forced into covering at the off but since then the action has been sideways to slightly lower and we are now quoting just below 5,020 on the rolling daily contract."

Travel companies were the day's biggest winners, with Tui Travel and Thomas Cook topping the main list, growing 4.2 per cent to 267.4p and 4.6 per cent to 256.3p respectively. The sector has been hit after doubts about its recessionary resilience, but with the clouds now slowly ebbing away, confidence is slowly returning.

The experts at Collins Stewart upgraded both to hold from sell yesterday, while investors in Thomas Cook benefited as the creditor banks of insolvent German retailer Arcandor placed their 43.9 per cent stake in the group. The move, which was favoured by management, comes after the bankers were unable to find interest from trade or private equity buyers.

Oil and gas group Cairn Energy continued its impressive form of recent weeks with another 3.3 per cent rise, closing the day at 2706p. The group has started production at its Mangala Field site in India in the last two weeks, and its positive momentum continued yesterday, no doubt helped by the chief executive of Gazprom saying that he sees $100 per barrel of oil by next year.

Home Retail Group, which runs Argos and Homebase, closed the day bottom of the FTSE 100 pecking order, losing 6.8 per cent of its value and finishing at 307.5p. After gaining almost a third in the last three months after a bevy of more upbeat trading statements, investors decided it was time to fill their boots.

Home Retail was joined by Next, down 4.1 per cent at 1675p and Kingfisher, off 4.0 per cent to 207.3p as investors shunned the retailers.

"Home Retail and retailers in general have had a very good run over the last few weeks and I think investors are finding any excuse possible to take profits at the moment. That's what appears to be happening with Home Retail," said KBC Peel Hunt.

Spirits on the FTSE 250 were no brighter with the index falling 11.34 points to 9,125.71p. Aside from the sports retailers dragging the market lower, others in the industry were also responsible for the falling market.

Carpetright dropped 9.1 per cent to 860.5p, despite saying that it was increasingly confident going into the autumn, while video game outlet Game suffered a 7.1 per cent fall, to 174p, after the watchers at Deutsche Bank cut their rating from buy to hold ahead of the company's full-year results scheduled for the end of the month.

Despite the gloom, there were winners on the 250. Cattle genetics group Genus closed the day up 4.0 per cent at 631p after announcing a rise in full-year profits and, perhaps more crucially for the market, predicting a strong recovery in its all-important US cow business.

Property investment group Workspace was up 6.3 per cent to 25.25p, with rumours circulating that the group could be the subject of a bid. One trader said he expected the stock to reach 40p.

In small caps, consumer electronics outfit Armour Group soared 27.2 per cent to 16.22p after saying that full-year profits would beat expectations.

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