Market Report: City tires of pummelling supermarkets

The road ahead for supermarkets looks tough, but for now the City seems to have tired of pummelling them.

J Sainsbury registered its first gains in five sessions yesterday, up 4.2p at 251.5p. Traders pointed to hopes that today’s first-half figures may not be as brutal as predicted.

Meanwhile, short sellers are easing off Tesco, off a modest 1.6p at 186.2p. FCA disclosure data reveals hedge fund Lone Pine Capital has cut its bet against the supermarket from 0.68 per cent of total shares to 0.4 per cent. And Karl Loomes, market analyst at SunGard’s Astec Analytics, reveals borrowing activity, a key indicator of short selling, is now at its lowest level for almost a year, with three times as many shares being returned as borrowed.

“Short sellers, if not optimistic that the share price will recover soon, are at least cautious of betting on further losses,” said Loomes.

A shock warning about poor trading from Next, 260p lower at 6605p, set a pessimistic tone on the bluechip index, which closed down 23.88 points at 6622.72. Associated British Foods bucked the trend, up 116p at 2679p after an upgrade from Credit Suisse. The bank believes profits at its sugar division are set to rebound, while expansion across the US will lead to higher earnings from Primark.

RPC Group bounded 33.5p higher to 559p on the mid-cap index after the plastic supplier said full-year revenue is set to be “significantly” higher than expected thanks to recent acquisitions, growth in the US and progress in the coffee capsule and UK DIY markets.

Punch Taverns added 0.9p to 8.88p on hopes that the restructure of its debt pile will complete successfully. Today is the deadline for lenders to exchange their bonds for new notes or shares.

Range Resources fell as much as 15 per cent on Monday after the company accidentally released a document referencing a $15m fund-raising in its properties. Yesterday it fell a further 0.55p to 1.05p as it admitted the gaffe and confirmed a loan for the sum from New York-based Lind Asset Management. Some of the cash will go towards working capital.