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Supermarkets pull FTSE 100 lower Supermarkets pull FTSE 100 lower
(about 3 hours later)
(Open): Supermarket shares led the FTSE lower after Sainsbury's reported another fall in sales and warned there was no sign that trading would improve. (Noon): A downbeat trading outlook from Sainsbury's sent shares in supermarkets tumbling, dragging the FTSE 100 lower.
Sainsbury's shares fell 2.15% after it said second quarter like-for-like sales, excluding fuel, fell 2.8%. Sainsbury's shares fell 4.9% after second quarter like-for-like sales, excluding fuel, fell 2.8%.
It also said the sales performance in the second half of the year was likely to be similar to the first half. It also said the sales performance in the second half of the year was likely to be similar to the first half, when sales dropped 2.1%.
Among the other supermarkets, Tesco dropped 2.7% and Morrisons - whose shares also went ex-dividend - fell 4%. There is also speculation Sainsbury's might cut its dividend when it unveils a strategic review next month.
"The increasing price consciousness and waning loyalty of UK consumers is fostering structural change in the grocery sector, with the Big Four seeing increasing scores of their traditional customer bases defect to discounters Aldi and Lidl," said George Scott from retail analysts Conlumino."The increasing price consciousness and waning loyalty of UK consumers is fostering structural change in the grocery sector, with the Big Four seeing increasing scores of their traditional customer bases defect to discounters Aldi and Lidl," said George Scott from retail analysts Conlumino.
"The resultant onslaught of promotions to fight back, combined with easing of some commodity price inflation, means that the value of what goes into shopper baskets is being squeezed.""The resultant onslaught of promotions to fight back, combined with easing of some commodity price inflation, means that the value of what goes into shopper baskets is being squeezed."
Tesco also announced on Wednesday that it had been notified by the Financial Conduct Authority (FCA) that it was under investigation following its admission last week that it overstated its half-year profit guidance by £250m. Among the other supermarkets, Morrisons - whose shares also went ex-dividend - fell 5.6% while Tesco dropped 3.8%.
Tesco announced on Wednesday that it had been notified by the Financial Conduct Authority (FCA) that it was under investigation following its admission last week that it overstated its half-year profit guidance by £250m.
The supermarket giant said it would continue to co-operate fully with the FCA and other relevant authorities.The supermarket giant said it would continue to co-operate fully with the FCA and other relevant authorities.
The benchmark FTSE 100 index was down 18.83 points at 6,603.89. The falls weighed on the benchmark FTSE 100 index, which fell 36.04 points at 6,586.68.
Royal Mail was the best performer on the index, rising 3.3% to 405p, after UBS raised its rating on the stock to "neutral" from "sell". Royal Mail was the best performer on the index, rising 3.3% to 405.10p, after UBS raised its rating on the stock to "neutral" from "sell".
On the currency markets, the pound dipped 0.03% against the dollar to $1.6208 and rose 0.09% against the euro to 1.2850 euros. On the currency markets, the pound fell against the dollar after a weak survey of the UK manufacturing sector added to doubts about when the Bank of England might start to raise interest rates.
Against the dollar the pound dipped to a two-week low of $1.6164, before recovering to $1.6190. Against the euro sterling rose 0.12% to 1.2850 euros.