Morrisons falls again on price war fears while FTSE suffers volatile day
|
Version 0 of 1. With the big four supermarkets already being squeezed by competition from discounters Aldi and Lidl, the prospect of an all out price war seems to be growing ever closer. But analysts at Shore Capital believe the discounters will react quickly if a price war does erupt, putting more pressure on the likes of Morrisons, Tesco and J Sainsbury. Following an investor meeting with the chief executive of Morrisons Dalton Philips and finance director Trevor Strain, Shore Capital repeated its sell recommendation on the business. Analysts Clive Black and Darren Shirley said: Morrisons' shares closed 4.6p lower at 197.3p, Tesco fell 0.15p to 284.05p and J Sainsbury dipped 2.4p to 309.6p. Overall it was a nervous day, with the market pulled in several directions. Chinese trade data showed a second monthly drop in exports, raising new concerns about a slowdown in the country's economy. In Europe there were disappointing industrial output figures from Italy and France, while on the positive side, Greece successfully returned to the bond markets. Early on investors were comforted by the latest US Federal Reserve minutes, suggesting an interest rate rise was some way off, while the Bank of England kept its own policy unchanged, to no one's surprise. But there was a flurry of falls after a big sale of Eurostoxx 50 futures, while Wall Street fell back in early trading. Continuing tensions in Ukraine, with Russia warning it would cut gas supplies unless the country paid its bills. So the FTSE 100 finished just 6.36 points better at 6641.97 after trading as high as 6688 and as low as 6620. Marks & Spencer lost all the early gains which followed a fourth quarter trading update showing a 1.9% increase in group sales. Early enthusiasm faded following an analysts call, with investors concerned about profit margins and disappointed by the lack of a strategic update. Marks closed 14p lower at 442p but rival Next benefited, adding 75p to £65.40. Royal Mail fell 8p to 507p, its lowest level since 22 October. The company warned on Wednesday that an investigation into wholesale mail price rises would create a period of uncertainty. Ofcom said on Wednesday it would investigate a complaint from rival TNT Post. Cantor Fitzgerald and UBS both issued sell notes. This week also saw the expiry of the government's lock-up on its near 30% stake in Royal Mail. British Gas owner Centrica dipped 3.9p to 333.7p on news of a £5.6m fine for blocking business customers from switching suppliers. Mining shares weakened after the disappointing Chinese trade data, with Antofagasta falling 18.5p to 829.5p and Kazakhmys closing 9.8p lower at 245.8p. G4S slipped 2.3p to 247.2p despite Wednesday's announcement that the UK government would allow the company to bid for work again after its recent overcharging on a contract to tag criminals. Ministers said they were satisfied the company had completed the necessary overhaul of its management and business. HSBC issued a negative note on G4S, moving from neutral to underweight with a target price cut from 260 to 220p. Analyst Alex Magni said: But Associated British Foods, which saw its shares hit recently after a profit warning from German sugar group Suezucker, recovered 68p to £26.71. In a positive note on the company - probably best known these days for its Primark discount fashion retailer - analysts at Morgan Stanley said the recent fall provided an opportunity for investors. RSA Insurance rose 0.5p to 94.95p after revealing a 96% takeup for its £773m cash call. The remaining shares were sold in the market. Among the mid-caps Cairn Energy lost 2.4p to 167.5p after deputy chief executive Mike Watts and chief financial officer Jann Brown announced they were stepping down at May's annual meeting. But recruitment group Hays ended 6.7p higher at 151.4p as it said full year profits would be at the top end of City forecasts of £141m after a positive third quarter. Oriel Securities said: Jefferies said: Finally Mothercare jumped 23.75p or 14.5% to 187p after the retailer reported reasonable fourth quarter results compared to rock bottom expectations. Like for like sales at its UK stores fell 0.3%, better than the 4% decline in the previous quarter which led to a profit warning and the departure of its chief executive. Its international business saw sales up by 9/8%. In a hold note analysts at Numis said: |