London's blue-chips retreated after the Federal Reserve refrained from offering new initiatives to help a slowly recovering US economy.
Photo: AFP
By Rachel Cooper, and agencies5:56AM GMT 15 Dec 2011 Comment
This christmas flowers netherlands could prove to be anything but a cracker for the nation’s embattled retailers, analysts warned, as grim unemployment figures cast a pall over the high street.
Publishing their Christmas trading preview, JP Morgan Cazenove analysts said that typically, they would be “relatively positive going into christmas flowers netherlands blogs , as December tends each year to mark the peak of pessimism [regarding] prospects for the sector.”
“However, this year the combination of a weakening consumer, unseasonal weather, heavy promotional activity, weak footfall and what we view as still too high estimates is causing us more concern,” they added.
“As ever, there will be winners and losers, but on balance we expect to see more of the latter than the former,” said the broker.
ING was not feeling overly optimistic, either, as it warned investors to “brace for impact” .
Given the recent profit warning from German retailer, Metro, and a “light” Tesco trading update, analysts thought this could “signify a pattern of several retailers reporting soft fourth-quarter sales and profits”.
With that in mind, they cut Tesco to “sell” from “buy” and Marks & Spencer to “sell” from “hold”. Britain was the main concern for Tesco, where analysts were worried that food retail will experience margin pressure. The broker also thought growth in key Asian markets, such as Korea, could be “lower for longer”.
For M&S, general merchandise was the reason for ING to turn bearish, with analysts arguing that the chain’s exposure to this market makes it “vulnerable to consumers spending less on big ticket items”.
But, the broker turned buyer of Wm Morrison. Analysts described the supermarket chain as a “safe haven”, given factors such as its international opportunities – including a 10pc stake in US online food retailer, FreshDirect – and share buybacks.
Morrisons edged up 0.8 to 316.9p, making it the only blue-chip to end the day above water. Tesco dropped 3.15 to 386.35p and M&S eased 7.2 to 308p.
With a raft of retailers on the wane, the market retreated into the red. Traders had been keeping their fingers crossed that Ben Bernanke, head of the US Federal Reserve, might hint at new policy measures to stimulate the American economy, but no such moves were forthcoming when he spoke on Tuesday.
As well as that American disappointment, dealers were also keeping a wary eye on the eurozone again as German chancellor, Angela Merkel, warned there is no easy and fast solution to the debt crisis. That helped send the FTSE 100 down 123.35 points to 5366.8 and the FTSE 250 sank 216.81 points to 9744.23.
3.30pm: Resurgent eurozone woes weigh on Wall Street
Wall Street is heading lower this afternoon after German Chancellor Angela Merkel said there’s no easy and fast solution to the euro-region debt crisis. Adding to investor woes were record high borrowing costs for Italy, which paid a euorozone record 6.47pc on new five-year bonds sold at auction.
The Dow Jones Industrial Average slipped 76 points to 11879 and the FTSE 100 sank 98 points to 5391.
Defensives such as British American Tobacco were amongst the few stocks to make any advance, with the cigarette manufacturer ticking up 0.8pc.
Lloyds Banking Group made tentative gains - creeping up 0.01 to 24.7p - as the the bank announced that chief executive, Antonio Horta Osorio, will be holding the reins of the Black Horse again from 9 January after two months off with exhaustion.
12.30: Prospect of job losses and lower growth weighs on Logica
Shares in Logica have tumbled 12.7 - 17pc - to 61.45p as the IT company announced it is to slash more than 1,300 jobs.
Logica, which provides IT consulting and outsourcing to businesses and governments, downgraded its full-year revenue growth forecast to about 3pc, from above 3pc last month and 5 pc earlier in the year.
Andy Green, Logica's chief executive, said:
We do see, pretty widespread now, clients taking decisions to pull in their horns and waiting to see what is happening with the euro crisis and the global economy.
Between 450 and 550 jobs would be cut in the Netherlands and Belgium, with more than half of its offices closing after negotiations with the workforce, Mr Green added.
Logica has struggled in the region since the downturn in 2008, where its focus on systems integration and consulting suffered as companies cut spending on major IT upgrades.
Some 450 jobs would also go in Sweden and the UK, Logica said, as it moved more work to cheaper locations outside Europe, and a further 200 consulting and systems integration jobs would go in Sweden.
The redundancies will cost about £80m this year.
11am: ITV slips as analysts highlight drop in X Factor ratings
Disappointing ratings for ITV's X Factor, with Saturday's leg of the final luring in just 10.4m viewers - its lowest viewing figure since 2006, have prompted critics to ask whether the singing contest can survive without a major shake-up.
Although analysts at Panmure Gordon remain bullish on ITV, the broker acknowledged that the X Factor franchise "may be getting tired now" and weaker ratings for the show "may be interpreted by the bears as an indication of X Factor fatigue amongst the viewing public".
Highlighting the X Factor's importance to ITV, they added.
X Factor, and much improved content across the suite of ITV channels, has been a feature in maintaining a high share of commercial impacts at ITV. In context, X Factor is in now eight years in duration, which makes it an ageing franchise. However, we have never found it easy to isolate X Factor in terms of its revenue importance to ITV. For the weekend shows this year, the advertising ratecard was said to be £8000 per second, which illustrates the sort of premium it can command.
Panmure Gordon said that lower X Factor ratings had no impact whatsoever on its ITV earnings forecasts and given that the stock is looking cheap, the broker is keeping its "buy" stance.
But as the wider market beat a retreat, ITV slipped 1.4pc to 62.15p.
10.25 SuperGroup rebounds despite slip in first-half profits
SuperGroup is soaring this morning, with the streetwear retailer jumping 10.35pc to 554.5p, after telling the market that the problems with its warehouse IT system that left stores short of stock in the autumn had now been resolved.
Back in October, the group warned that profits would be hit by the warehouse troubles and today, SuperGroup reported that profits had fallen 4pc to £13m in the first half of the year. Sales of its trademark hoodies, t-shirts, check shirts and jogging bottoms leapt 51pc to £136.1m.
Analysts at Seymour Pierce were bullish, saying:
We are keeping our Buy recommendation with a price target of £10. The key drivers behind our recommendation are the following. 1) International remains the main priority of the group. 50 franchised stores should be opened in FY12 and two European owned outlets in the next eighteen months. 2) The impact of the Regent Street store should not be underestimated. It will most importantly enable management to further develop the assortment and the brand, which remains very much in vogue. 3) The company will, in our view, rightly take a more measured approach to expansion over the medium term
But, analysts at Peel Hunt kept their "hold" rating, arguing "the shares offer value if forecasts can be met, but visibility remains low and investors are unlikely to give management the benefit of the doubt".
While SuperGroup accelerated, the wider market was on the wane with the FTSE 100 slipping 30 points to 5459 and the FTSE 250 falling 47.5 points to 9913. Investors were somewhat disappointed by the US Federal Reserve yesterday refraining from announcing any additional measures to boost the country's economy.
Japan's Nikkei 225 index fell 0.4pc to 8,519.13, South Korea's Kospi lost 0.3pc, Hong Kong's Hang Seng shed 0.2pc and Australia's S&P/ASX 200 dipped 0.1pc.
US stocks gave up gains on Tuesday after the Fed released a policy statement that made clear it was not offering any new steps to help the economy.
The Fed said that the US economy, while improving, is still weak. Unemployment remains high, and it remains vulnerable to the European debt crisis, which could push the continent into a recession and slow U.S. growth.
Analysts said markets were disappointed that the Fed refrained from a third round of large-scale purchases of Treasury securities, dubbed quantitative easing III or QE3.
Francis Lun, managing director of Lyncean Holdings in Hong Kong, said:
I think QE3 would be a welcome change to the status quo. I think the market was disappointed
The Dow Jones industrial average fell 0.6pc to close at 11,954.94. The Standard & Poor's 500 fell 0.9pc and the Nasdaq composite fell 1.3pc.
The Dow dropped more than 70 points in the last hour of trading and had risen as high as 126 points earlier Tuesday after two strong auctions of European debt. The Spanish government was able to sell short-term debt at much lower interest rates compared with a month ago, a signal that markets are becoming less fearful about the government's ability to repay its debt.
And in its first sale of short-term bills, the European Financial Stability Fund raised 1.9 billion euros ($2.6 billion).
Still, investor sentiment remained fragile amid threats by Standard & Poor's to downgrade the credit ratings of 15 countries that use the euro because of the region's debt crisis.
Chinese property shares dropped after the government signaled that it would maintain price curbs on real estate.
Australia's Westpac Banking slipped after the bank warned that net interest margins, and revenues in its markets business, were being impacted by Europe's debt crisis.
Tuesday's market report
Slicker oil prices fuel FTSE comeback
FTSE live: market report - as it happened December 13, 2011
Monday's market report
Glaxo recovers on drug hopes as FTSE wilts
FTSE live: market report - as it happened December 12, 2011
Friday's market report
Traders pick bank stocks on hopes there will be no tax
FTSE live: market report - as it happened December 9, 2011
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