FTSE 100 movers: DCC boosted by Goldman upgrade; Tesco drops

London’s FTSE 100 was down 0.9% to 7,123.74 in afternoon trade as investors continued to mull over US President Trump’s latest policy decisions.

DCC was a high riser as Goldman Sachs upgraded the stock to ‘buy’ from ‘neutral’ and lifted the price target to 7,400p from 7,000p, saying recent underperformance provides an attractive entry point.

GS noted the stock has underperformed the Stoxx 600 by 15% since November 2016, mostly likely caught up in a broader sector rotation. Its de-rating creates an attractive entry point for two reasons, the bank said. Firstly, it pointed to the fact that DCC is not a typical defensive stock, and secondly, it highlighted its significant M&A growth potential and superior returns profile, which it said warrant a premium valuation in our view.

Telecoms group Vodafone was in the black after confirming it is in talks over merging its Indian business with Idea Cellular, which is part of the Aditya Birla Group.

Supermarket Sainsbury was also up after Bank of America Merrill Lynch said it was the best candidate for M&A of all the UK grocers.

United Utilities was on the front foot as RBC Capital Markets lifted the stock to ‘sector perform’ from ‘underperform’. The bank said Brexit uncertainty and M&A interest could both be positive catalysts for the share price.

“However achieving better totex outperformance amidst a relatively more challenging service area (versus industry peers) will be key to UU’s longer-term attraction. Whilst some of these challenges may be nature, there perhaps are many that are within management’s control.”

On the downside, supermarket Tesco lost ground. CMC Markets’ Michael Hewson said speculation is mounting of competition regulator intervention into the Booker acquisition. “With the acquisition of the small convenience stores such as Budgens, Premier and Londis, there are fears the grocery giant could exert undue influence within the convenience store market to the detriment of independent store owners,” he said.

Barclays was also weaker as Berenberg cut its stance on the stock to ‘sell’ from ‘hold’.

“We struggle to justify Barclays’ current valuation of 12.2x our 2018E EPS (10.2x consensus). In our view, this is predicated on IB activity continuing at the elevated H2 2016 level and the US consumer credit cycle being extended materially. We disagree and believe risks are skewed to the downside.”

Risers

DCC (DCC) 6,395.00p 3.31%
Vodafone Group (VOD) 196.55p 1.66%
London Stock Exchange Group (LSE) 3,142.00p 1.35%
Antofagasta (ANTO) 830.00p 0.91%
Pearson (PSON) 612.50p 0.91%
Convatec Group (CTEC) 246.80p 0.78%
Direct Line Insurance Group (DLG) 357.30p 0.68%
Sainsbury (J) (SBRY) 256.20p 0.67%
Paddy Power Betfair (PPB) 8,155.00p 0.62%
United Utilities Group (UU.) 905.00p 0.61%

FTSE 100 - Fallers

Tesco (TSCO) 198.95p -3.68%
Old Mutual (OML) 205.90p -3.42%
Barclays (BARC) 224.90p -2.47%
Rolls-Royce Holdings (RR.) 669.50p -2.41%
Mediclinic International (MDC) 793.50p -2.10%
InterContinental Hotels Group (IHG) 3,711.00p -1.96%
Hikma Pharmaceuticals (HIK) 1,823.00p -1.73%
Burberry Group (BRBY) 1,621.00p -1.70%
BP (BP.) 478.70p -1.66%
Diageo (DGE) 2,207.00p -1.65%