Thursday, September 9, 2010

FTSE falls as retailers slide on weak outlook

LONDON: Britain's top share index fell on Thursday, Sept 9 as retail stocks dropped on downbeat comments from Home Retail and Wm Morrison Supermarkets, outweighing a rise in banks ahead of the BoE's rate decision.

By 0739 GMT, the FTSE 100 was down 4.65 points, or 0.1 percent at 5,425.09, having closed up 0.4 percent, at 5,429.74.

Home Retail, Britain's No. 1 household goods retailer, fell 2.1 percent after it forecast a 20-25 percent reduction in first-half profit, with sales at its Argos stores continuing to fall as low-income shoppers cut back spending.

The announcement triggered a sell-off among the retailers, with Kingfisher and Marks and Spencer down 1.6 and 1.2 percent respectively.

Wm Morrison Supermarkets, Britain's fourth-biggest grocer, fell 4.3 percent after it said it will open convenience stores and may sell groceries online as it seeks to broaden its growth avenues in what it expects to remain a tough market this year.

Mid-cap British music, books and games retailer HMV Group fell 11.3 percent, having soared ahead on Wednesday, as it reported a 10.6 percent fall in sales for the first quarter as the soccer World Cup distracted customers from DVDs and books.

"This is a shoe that has been waiting to drop for some time," said Jeremy Batstone-Carr, strategist at Charles Stanley, said.

"Given the extent to which consumers are retiring debt rather than living on credit and bunkering down ahead of what Nick Clegg (UK Deputy Prime Minster) described as 'choppy and uncertain times ahead' this is all going to have an adverse affect on discretionary spending."

After a fairly directionless first half of the week there will be plenty of macroeconomic data on Thursday for investors to chew on.

UK July trade data is due at 0830 GMT and is expected to show the trade deficit widened from the previous month, while at 1100 GMT the Bank of England is expected to keep interest rates on hold at 0.5 percent for the 18th month running.

All 60 economists in a Reuters poll forecast no change in rates on Thursday and most said they expect no rise until the second quarter of 2011 at the earliest.

COMMODITY FALLS

Energy and mining stocks showed some weakness following recent strength and weighed by falls in commodities, which softened after a sell-off overnight in China.

On the upside, banks gained, having been on the back foot recently on worries over the health of the European economic recovery.

Lloyds Banking Group, up 1.2 percent, was among the top risers after agreeing to sell its stake in housebuilder Crest Nicholson to U.S. investment company Varde, continuing to shed non-core assets and refocus on its core lending activities.

The UK bank was also helped by Barclays Capital which raised its rating to "equalweight" from "underweight".

ARM Holdings, which has been mentioned as a potential bid target, extended recent gains, up 3.3 percent.

The chipmaker also unveiled its cortex-a15 mpcore processor, which won its first licensee, Texas Instruments. - Reuters

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