Market Report: Sainsbury's set for top shelf Christmas

The battle of the supermarkets will enter a new round ahead of Christmas, and City scribblers think Sainsbury's will be having a jolly festive period while Morrisons could be decidedly lacklustre.

The grocery expert Clive Black at Shore Capital said: "If patterns currently evident continue... the Christmas winners will be Aldi and Sainsbury."

He takes his "hat off to Sainsbury's management" as the supermarket group is gaining market share and "sustaining outperformance momentum that is likely to sustain the stock's premium rating to Morrisons and Tesco".

Mr Black cites Nielsen's market share data for the four weeks to 13 October which showed Sainsbury's up 6.6 per cent and Waitrose up 7.8 per cent, but Morrisons is "still materially underperforming" with implied sales down 0.5 per cent.

Black retained his hold rating on Sainsbury's shares at 354p and reiterated his sell stance on Morrisons with a target share price of 276p. Sainsbury's shares checked in a 1.6p rise to 354.2p and Morrison's lost 0.3p to 267p.

General retailer Marks & Spencer was also on Black's shopping list, with a buy rating and a share price target at 388p. It edged up 1.6p to 389.7p.

Takeover rumours continued to circulate around the pharmaceutical industry ahead of results from AstraZeneca today. Chatter has it that since Astra – down 15.5p to 2884.5p – needs to restock its drug pipeline and is taking a long look at US drug group Amarin. But it will have competition from GlaxoSmithKline and US-based Eli Lilly.

Talking of mergers – well, failed ones – Morgan Stanley's analysts cast their eye over BAE Systems after its abortive Eads deal. They give the defence group a price target of 335p and resumed coverage with a hold rating, but added: "With the US elections fast approaching and little clarity on budgets likely in the near term, we see limited re-rating potential in BAE. However, speculation over M&A is likely to provide some support." BAE glided up 6.5p to 312.2p.

Scribes at Bernstein got radical and proposed: "Vodafone and Verizon: Is the unthinkable thinkable… who better than Vodafone to see the writing on the wall for a premium operator in a structurally declining market? The time may be right for it to relinquish its 45 per cent stake," Bernstein claims. Vodafone lost 2.55p to 172.45p.

In some quarters mining companies have been hated almost as much as bankers. There's been violence in South Africa, investor turmoil at Nat Rothschild's coal miner Bumi and the ongoing Glencore/Xstrata saga.

Now analysts reckon we should sell shares in miners who hunt for gold.

Investec's Hunter Hillcoat has published a note: "Time to take a breather (take profits)," slapping a downgrade on Africa- focused Randgold Resources and Centamin and reiterating his view on African Barrick Gold – no better than a hold. Back in the summer he said it was good to buy but since then "gold equities have performed well, appreciating by an average 28 per cent", he said. "Though we are raising our estimates and price targets, given the sector's outperformance, we now recommend that investors take profits at current levels, on the basis of buying again at lower levels."

Egypt's Centamin, which Mr Hillcoat gave a share price target of 106p, saw its shares drop 0.7p to 97.4p, and Randgold, with a share price target of 7,715p, lost 50p to 7,380p. African Barrick Gold, with a target price of 530p, gained 6.8p to 486.4p.

The FTSE 100 index was bumpy, and tried to regain some of yesterday's losses despite eurozone concerns continuing. The benchmark index was propped up by better-than-expected figures from China; manufacturing might contract at a more moderate pace in October than thought. The index edged up by 6.87 points to 5804.78.

On the mid-cap index, Argos owner Home Retail Group got punters excited with hopes of a turnaround plan. Despite analysts being less than impressed, shares managed a 1.6p gain to 105.7p.

Bloomberg noted online grocer Ocado now tops Home Retail as the most shorted retail stock according to Markit.

On AIM, video search engine blinkx travelled up 4.25p to 53.50p after broker Peel Hunt named it as one of its top media picks in its media report, retaining the buy recommendation and share target price of 101p.