Market Report: Tesco tumbled to 356.16p while Morrisons was weaker at 266.2p

Punters were warned cheap supermarkets will remain a threat to the UK's established grocers so Tesco and Morrisons stock were off the shopping list yesterday.

Analysts at Goldman Sachs predicted discounter and online competition will "capture 22 per cent of the UK grocery market by 2017" and "industry margins are likely to contract".

So they recommended ditching Tesco, Morrisons and Sainsbury's and investors obeyed as Tesco tumbled 8.55p to 356.15p, while Morrisons was 7.8p weaker at 266.2p. Sainsbury's was somewhat insulated after a storming half-year sales update earlier this week and added another 3.9p to 414.6p.

Updates from retailers demonstrated it was those with overseas stores that were prospering. Luxury giant Burberry added 27p to 1,489p after posting first-half profits above £1bn.

Over on the mid-tier table fashion brand Ted Baker's successful international growth helped it record a 24 per cent jump in sales to £77.1m and it strutted up 97p to 1,887p. Meanwhile, books to stationery shop WH Smith reported comparable sales down 4 per cent but it managed to tick up 3p to 983p.

The wider market was in a buoyant mood and added 36.13 points to 6,666.13 as dovish comments out of the US calmed traders.

Bottom of the blue-chip index was British Gas-owner Centrica which warned profits will be lower than expected and it lost 18.6p to 345.3p.

Outsourcer Serco said its contract issues and investigations into overbilling will hit profits for the next two years and it collapsed 84.9p to 419.1p – bottom of the FTSE 250 league table.

Ophir Energy – top of the mid-tier table index – sold half its interest in a project offshore of Tanzania to a subsidiary of Singapore's Temesek for £1.25bn and jetted 33p to 362.1p. Sausage-skin maker Devro warned on full-year profits and tumbled 3.3p to 316.7p.

Volex, the electrical cable maker, lost 25.75p to 91p when it reported a $4.1m (£2.5m) pre-tax loss in the first half.

Daily Mirror-owner Trinity Mirror said it expects to report full-year earnings at the high end of market expectations and produced a 28p gain to 166p.

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