London open: Stocks gain as supermarkets rally, yuan strengthens

London stocks started on the front foot on Tuesday, driven by retailers after better-than-expected trading updates from Wm Morrison Supermarkets and Debenhams.

Shares in Morrisons gained after the supermarket delivered like-for-like (LFL) sales growth of 0.2% in the nine weeks to 3 January, miles ahead of the 2% decline predicted by analysts, with LFL sales including fuel down 0.6% over the period. Revenues over the Christmas period were helped by LFL transaction numbers in core supermarkets up 1.3% on the same period last year and online grocery sales nearly doubling.

Debenhams also rallied on upbeat Christmas trading results. For the 19 weeks to 9 January, like-for-like sales were up 1.9%, comfortably beating expectations for a 0.1% drop and better than last year’s 0.8% decline.

Tesco, J Sainsbury, Marks & Spencer and Ocado Group surged on positive sentiment felt by the updates.

Investors seemed to shrug off figures from Kantar Worldpanel showing sales in the British grocery market fell 0.2% in the 12 weeks to 3 January, due to an ongoing supermarket price war amid fierce competition.

Sainsbury’s was the best performer with sales up 0.8% during the period while Tesco, Asda, and Morrison’s saw sales declines of 2.7%, 3.5% and 2.6%, respectively.

Meanwhile, China continued to be in focus as the central bank fixed the yuan firmer again on Tuesday to 6.5626 per dollar. The spot yuan strengthened to 6.5756, while the offshore yuan increased around 1% to 6.6200, narrowing the spread between the two to under 0.7%.

“This recovery in the offshore yuan could well be enough to help put a floor under stock markets in the short term, as US markets managed to stabilise yesterday despite posting new multi week lows during the day,” said Michael Hewson, chief market analyst at CMC Markets.

However, Hewson warned: “With expectations growing that the Chinese yuan has further to go in terms of declines, due to a weakening Chinese economy, speculation is rising that oil prices could well push below the $30 a barrel level in the coming days, particularly given yesterday’s announcement by the EU that Iranian sanctions could be lifted fairly soon.”

Brent crude fell 1.8% to $30.97 per barrel and West Texas Intermediate dropped 2.4% to $30.67 per barrel at 0912 GMT.

Oil stocks, including BP and Tullow Oil, were under the cosh on the slump in crude prices.

Mining companies were also under pressure amid concerns about the slowdown in China's economy. BHP Billiton, Glencore, Rio Tinto and Antofagasta were among the biggest fallers on the FTSE 100 in morning trade.

Still to come, UK industrial and manufacturing production figures are due at 0930 GMT and Bank of England Governor Mark Carney speaks in Paris at 1415 GMT ahead of the central bank’s policy decision announcement on Thursday.

Market Movers

FTSE 100 (UKX) 5,898.98 0.46%
FTSE 250 (MCX) 16,702.56 0.27%
techMARK (TASX) 3,144.98 0.59%

FTSE 100 - Risers

Tesco (TSCO) 153.45p 5.50%
Sainsbury (J) (SBRY) 251.50p 3.37%
Berkeley Group Holdings (The) (BKG) 3,657.00p 3.36%
Barratt Developments (BDEV) 614.00p 3.28%
Burberry Group (BRBY) 1,119.00p 3.23%
Whitbread (WTB) 4,324.00p 2.98%
GKN (GKN) 284.40p 2.05%
Persimmon (PSN) 2,025.00p 1.71%
International Consolidated Airlines Group SA (CDI) (IAG) 599.50p 1.70%
Marks & Spencer Group (MKS) 429.70p 1.63%

FTSE 100 - Fallers

BHP Billiton (BLT) 611.40p -3.88%
Sports Direct International (SPD) 388.90p -3.50%
Glencore (GLEN) 71.25p -2.97%
Rio Tinto (RIO) 1,651.00p -2.71%
Antofagasta (ANTO) 377.40p -2.66%
Anglo American (AAL) 225.50p -2.15%
Fresnillo (FRES) 672.50p -1.32%
Hargreaves Lansdown (HL.) 1,332.00p -1.26%
Aberdeen Asset Management (ADN) 247.20p -1.08%
BP (BP.) 325.05p -0.91%

FTSE 250 - Risers

Debenhams (DEB) 76.00p 15.15%
Morrison (Wm) Supermarkets (MRW) 168.50p 10.64%
Vectura Group (VEC) 197.00p 5.91%
Jimmy Choo (CHOO) 127.10p 3.59%
Ocado Group (OCDO) 285.60p 3.18%
Vedanta Resources (VED) 214.20p 3.18%
Just Retirement Group (JRG) 164.70p 2.94%
B&M European Value Retail S.A. (DI) (BME) 254.80p 2.87%
Poundland Group (PLND) 171.00p 2.58%
Entertainment One Limited (ETO) 166.40p 2.40%

FTSE 250 - Fallers

Greggs (GRG) 1,128.00p -7.92%
Cineworld Group (CINE) 510.50p -5.02%
Tullow Oil (TLW) 126.10p -4.97%
Michael Page International (MPI) 424.40p -4.97%
Booker Group (BOK) 163.70p -4.71%
Hays (HAS) 124.10p -4.46%
Cairn Energy (CNE) 129.00p -4.16%
TalkTalk Telecom Group (TALK) 194.30p -3.62%
Hastings Group Holdings (HSTG) 162.60p -3.16%
Petrofac Ltd. (PFC) 661.00p -2.87%