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UK Equities
Supermarket stocks hit bottom of FTSE 100
From the Financial Times of Tue, 09 Dec 2014 11:58:20 GMT

Investors were marking down shares in the UK’s three main listed supermarkets on Tuesday, after the problems faced by the sector’s market leader intensified.

Tesco issued its fourth profit warning in a year, cutting £1bn from its annual profit guidance, which was only restated for the third time a month ago. Shares in the company — already one of the worst-performing stocks on the FTSE 100 over 2014 — fell a further 14 per cent in early trade to 161p.

“Tesco is no longer a viable investment,” said Marc Kimsey, senior trader at Accendo Markets.

“Today’s update suggests Tesco’s circumstances will worsen before improving, and at great cost. Full-year profits are way off the City’s already low expectations. A fire sale of assets is almost nailed on and a rights issue cannot be ruled out.”

Richard Hunter, head of equities at Hargreaves Lansdown, said: “The company partially attributed the lower figure to increased investment in the business, but amid the accounting mishap, the revolving door in the boardroom and an unforgiving attack from the discount retailers, investors have simply lost interest in waiting for a recovery story which still seems some way off.”

Tesco was not short of familiar company at the bottom of the main London index, as the warning also reminded investors of the increased competition the wider sector faces from discount retailers. Wm Morrison was the second biggest faller, down 4.9 per cent at 175.9p, while J Sainsbury lost 3.9 per cent to 226.7p.

The rundown of retailers at the foot of the index was interrupted by oil stocks, as crude prices continued to slide. Weir Group, the oilfield services provider, fell 4.8 per cent to £16.57. Petrofac lost 3.1 per cent to 744.3p, while Tullow Oil was down 2.3 per cent at 382.9p.

Overall, the FTSE 100 fell 1.1 per cent to 6,596.49, a drop of 76 points. Its losses were broad, as traders across global markets shunned risk. Only five constituents of the blue-chip index rose, and they shared defensive properties. Randgold Resources gained 0.8 per cent to £42.18 and Imperial Tobacco ticked up 0.1 per cent to £28.29.

G4S, the support services company, topped the leaderboard after a broker upgrade. Anlaysts at Credit Suisse lifted their rating on the stock from “neutral” to “outperform”, saying: “G4S is, we think, a combination of an attractive multiyear self-help story plus a stock for which organic growth should accelerate into 2015.

“We think there is significant opportunity within the business to reduce cost and improve efficiency.”

The shares rose 2.5 per cent to 281p.

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