Market Report: Stick with Tesco despite Irish woes
Friday 06 September 2013
Things may be going wrong for Tesco in Ireland but it's not time to give up on the supermarket just yet, according to the scribblers at Cantor Fitzgerald. Mike Dennis at the broker warns that the "main disappointment at Tesco interims, due 2 October, could be Europe". He notes that things don't look good in the Republic of Ireland, Tesco's biggest European market, with sales there in the last quarter falling by 3 per cent.
Mr Dennis warns that the supermarket giant's current strategy of maintaining margins and investing heavily in new products and fresh produce is looking increasingly risky but, given the relative discount the shares are trading at compared with peers, he holds his buy recommendation. Tesco added 1.15p to 367.2p.
After a raft of good economic numbers from the UK and beyond over the past few days, traders managed to forget about the uncertainty over Syria and send the top flight index climbing to a three-week high.
David Madden, an analyst at IG, said: "The US government will debate the Syrian question next week, and in the meantime traders have bought back into the market. The missile tests by Israel and the US on Tuesday showed us how jittery equities are about the possibility of war, but traders are more than happy to go long when they feel conflict is not imminent."
The benchmark index was up 57.7 points at 6,532.44. Banks were among the most in demand on the FTSE 100 – Lloyds added 2.14p to 74.77p, Standard Chartered put on 37p to 1472.5p, Barclays was up 6.45p at 296p and HSBC jumped 16.1p to 707.6p.
Meth labs and misogynistic admen make good business for Entertainment One. The TV and film distributor behind Peppa Pig yesterday signed an exclusive multi-year deal with US TV network AMC, responsible for programmes including Breaking Bad and Mad Men. The first projects under the deal are a dramatisation of the PC boom in the early Eighties, a period piece about a group of spies set during the American war of independence and a police drama. Entertainment One, which is set to move up to the FTSE 250 this month, added 1p to 220p.
Despite unease in some quarters over the Government's efforts to boost the property market, HSBC thinks it's time to pile into the housebuilders. The bank raised its target price on no fewer than eight housebuilders, saying shares "undervalue structurally higher sector-wide returns, with added growth opportunity for smaller listed builders". Persimmon was the biggest winner from the note, ending the day on top of the index, up 41p at 1152p.
Marks & Spencer was boosted by HSBC, following the launch of its make-or-break winter womenswear range. Big retailers are set to benefit from improving economic conditions and Paul Rossington at the bank notes: "some will rise more than others." Mr Rossington thinks M&S could be among the best performers and upgraded the retailer to overweight from neutral. It added 16.2p to 494.07p. UBS reckons it's time to cosy up to Intercontinental Hotels Group. Scribblers at the bank upgraded it from neutral to buy, saying the stock is at an attractive price and the hotels owner shot to the top of the index, adding 39p to 1875p.
What a difference a day makes – two days ago easyJet was among the stragglers on the top-flight index, hit by a profit warning from its normally bullish rival Ryanair. But yesterday easyJet took off after revealing passenger numbers were up 3.9 per cent in August. The budget airline added 21p to 1236p, British Airways owner IAG was also up after announcing strong August traffic figures. It put on 8.4p to 299.4p.
Microchips designer Arm Holdings made gains after Samsung unveiled its new Galaxy Gear smartwatch. With Google and Apple tipped to follow Samsung into the wearable technology fray, industry watchers are proclaiming the era of the smartwatch has officially "arrived". Arm, whose chips are used in smartphones and tablets, stand to benefit and the Cambridge-based firm added 19p to 894p.
Interdealer brokers Icap and Tullett Prebon benefited from a positive note from Morgan Stanley, in which the bank upped its rating of Icap and raised its target price on Tullett. Icap added 25.1p to 400p while Tullett put on 19.2p to 382.4p.
On AIM US oil and gas firm Magnolia Petroleum saw its shares climb after announcing four new wells in Oklahoma. The news brings its total wells to 174, one short of its year-end target of 175. Magnolia pumped up 0.05p to 2.475p.
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