FTSE 100 movers: Dunelm boosts retailers but Centrica hit by downgrade
London's FTSE 100 was down 0.6% to 6,797.85 in afternoon trade on Monday as investors eyed the latest trade talks between the US and China.
Centrica was the worst performer on the top-flight index after Jefferies downgraded the British Gas owner to 'hold' from 'buy' and cut the price target to 125p from 170p saying there was material downside risk to 2019-20 earnings.
"With operational issues for its E&P and nuclear assets, suspension of UK capacity market payments, volatile commodity prices, high customer churn rates and standard variable tariff price cap, we estimate an 8% year-on-year decline in 2019 earnings per share for Centrica (versus flat earnings profile previously). With this, we see 10% downside risk to 2019-20 consensus EPS."
The bank also said it expects a weak FY18 update in February to weigh on the stock.
Imperial Brands and British American Tobacco were under the cosh as Cowen cut its stance on the stocks to 'market perform' from 'outperform', arguing that tumultuous times for the industry are far from over.
British American Tobacco is "arguably the most disadvantaged" by the changing US landscape, Cowen said, as it has experienced meaningful market share losses in the e-cigarette category for its Vuse offering and is the market share leader in menthol.
HSBC was in the red after Citi cut its stance on the bank to 'sell', citing trading income and competition concerns.
Next, Marks & Spencer, Sainsbury, Ocado and B&Q owner Kingfisher were all higher after a well-received update from FTSE 250 home furnishing retailer Dunelm. Although the company sounded a note of caution about full-year results due to "unprecedented" uncertainty caused by Brexit, it posted 9% growth in total like-for-like sales for the second quarter, with LFL stores revenue up 5.7% year-on-year and online revenue 37.9% higher.
The retail sector will be firmly in focus this week as updates are due from Marks and Spencer, Wm Morrison, Sainsbury and Tesco.
CMC Markets analyst Michael Hewson said they could also surprise to the upside, given the numbers from German discount supermarket Aldi earlier on Monday, which reported record Christmas sales.
"The big question here is how much did the two young upstarts of Aldi and Lidl steal the big four’s Christmas lunch," he said.
FTSE 100 - Risers
NMC Health (NMC) 2,790.00p 6.49%
Fresnillo (FRES) 916.60p 4.73%
Next (NXT) 4,630.00p 3.39%
Marks & Spencer Group (MKS) 260.50p 2.92%
TUI AG Reg Shs (DI) (TUI) 1,187.00p 2.42%
Antofagasta (ANTO) 804.50p 2.41%
Ashtead Group (AHT) 1,742.50p 2.38%
Sainsbury (J) (SBRY) 266.10p 2.35%
Ocado Group (OCDO) 834.40p 2.15%
Kingfisher (KGF) 219.90p 2.09%
FTSE 100 - Fallers
Centrica (CNA) 131.13p -4.49%
Imperial Brands (IMB) 2,360.50p -3.75%
British American Tobacco (BATS) 2,499.50p -3.23%
Smurfit Kappa Group (SKG) 2,124.00p -3.19%
HSBC Holdings (HSBA) 642.70p -2.10%
InterContinental Hotels Group (IHG) 4,127.00p -2.02%
Rolls-Royce Holdings (RR.) 810.20p -1.89%
BAE Systems (BA.) 464.30p -1.84%
CRH (CRH) 2,121.00p -1.76%
Standard Chartered (STAN) 597.50p -1.69%