Market Report: Time to add M&S to your shopping list

It could be time to scratch department store Debenhams from the shopping list and add high street bellwether Marks & Spencer, City shop watchers said yesterday. Panmure Gordon's Jean Roche thinks M&S may well have improved "under the guidance of John Dixon and Belinda Earl", who were brought in by chief executive Marc Bolland as executive director of general merchandise and style director earlier this year.

Ms Roche thinks M&S's "clear commitment to improve returns to shareholders" and the fact it now yields an "attractive" 4.4 per cent following the sell-off of its shares recently are reasons to buy the stock. She also thinks it will be boosted in the short term by weak comparisons in clothing sales when it updates on first-quarter trading on 9 July.

Meanwhile Ms Roche's style radar has tuned out of Debenhams. She thinks when it reports on trading for the 16 weeks to 22 June tomorrow it is unlikely analysts will upgrade their forecasts and the shares could drift further. She rates the department store group a hold with a 88p price target. M&S was 8.2p smarter at 426p and Debenhams edged up 1.5p to 88.50p.

The wider market was back in positive territory — a bounce of 72.81 points to 6,101.91 for the FTSE100. But most traders did not expect the rebound to last long.

Matt Basi, head of UK sales trading at CMC Markets UK, said: "The bull/bear debate rages over proposed Fed tapering, a potential Chinese slowdown and the consequences for medium-term equity valuations. The bounce is being viewed with suspicion with many traders awaiting the next leg down."

The biggest casualty was tin can-maker Rexam, which plummeted a worrying 11.4p to 453.7p, after it issued a profit warning.

Alastair Winter, chief economist at Daniel Stewart & Co, said: "There is a relentless flow of American data and [Fed] speeches culminating in the non-farm payrolls next Friday, which are likely to cause some scary price movements. This is a time to pick up bargains one by one amongst big caps but we must not forget that … it ain't over till it's over."

Floating into view at the top of the table was cruise ship group Carnival. Chief Executive Micky Arison, who has been in charge since 1979, will be replaced by board member Arnold Donald, as the company tries to steer away from the disasters that have plagued it recently. Investec's James Hollins said: "Carnival has been crying out for governance changes and we welcome the role split." The shares were full steam ahead, up 116p to 2,291p.

The smartphone market has been hit by "concerns of high-end smartphone saturation" and the battle to supply new designs for microchips has heated up now that US giant Intel and Nvidia have joined the party to supply the likes of Apple. Investors recently have decided ARM Holdings is at risk — in just over a month its shares have crashed more than 30 per cent. But Investec's Julian Yates thinks the Cambridge-based iPad and iPhone microchip designer has nothing to fear.

Mr Yates said he had already factored in the "segmentation of the smartphone market" as well as any market share loss to ARM's valuation after Intel's decision to re-enter the market. He also thinks "Intel will struggle to take material share in the near to medium term". Global trends for the demand for increased power and quicker tablets and smartphones will also boost sales for the microchip-makers — which means that there is still plenty of demand for new chip design.

Yates thinks ARM's present share price is "too pessimistic" and he rates it a buy with a 1,000p price target. The shares soared 27.5p to 786p.

On the mid-cap index, hotels group Millennium & Copthorne got a downgrade to equal weight from analysts at Morgan Stanley with a 640p price target and it dipped 1p to 540p. Electrical retailer Darty's chairman Alan Parker and new chief executive Régis Schultz bought shares at 58.5p but the former Comet owner was static at 59.75p.

Africa Oilfield Logistics, founded by resource entrepreneurs Phil Edmonds and Andrew Groves to invest in the oil and gas industry, made its debut on AIM yesterday, raising £6.5m listing at 5p a share. It spurted 1p to 6p.

Lo-Q, which creates virtual queue devices for theme parks including country star Dolly Parton's water park Dollywood's Splash Country in Tennessee, reported wider first-half losses but said it had seen good sales momentum. Its shares lost 17p to 530p on the news.

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