FTSE 100 movers: Grocers and financials drag index down

The FTSE 100 was dragged lower by supermarkets, financials and housebuilders on Wednesday, as large cap stocks continued to struggle for a second day.

Grocers Tesco and Morrison were wobbling like a wonky-wheeled shopping trolley after analysts at HSBC put them in the reduced section as it warned of looming price cuts for the sector, coming alongside BRC-Nielsen data that showed UK shop prices were continuing to fall.

In fact, Tesco was cut to a 'hold' rating from 'buy', with Morrisons downgraded to 'reduce' from 'hold'. The only stock to escape was Sainsbury's as it was already at 'reduce'. HSBC warned that Asda appeared likely to be close to fundamentally repositioning it prices, bringing down sector profits sector.

The analysts added: "Asda has learnt if it prioritises margins, it will lose its sales, which then leads to a falling margin. Better a company invests its margin to reward its customers and to protect its sales than to see margins eroded by the competition."

Aviva was also lower, the day after it was one of a throng of major investment groups to suspend trading of their UK property funds, with an attempt to reassure the market with a confident trading update not enough to stop its shares tumbling for the third day in a row.

The insurer highlighted a number of new strategic objectives, including mid-single digit growth in operating profits in the medium term and a dividend payout ratio of 50% of operating earnings per share in 2017. Aviva also said it aimed for cash generation to reach £7bn in cumulative business unit remittances over the period from 2016 to 2018.

On the fallout from the 24 June referendum decision to leave the European Union, which led to Aviva following Standard Life and M&G in stopping redemptions from their UK property funds, he said management were "confident we can continue to grow" even though it was "too early to quantify the precise impact".

Other insurers, notably Prudential, were also continuing the sharp slide since Monday.

Lenders, led by Royal Bank of Scotland, Lloyds Banking and Provident Financial, were also among the big fallers, despite the move by the Bank of England on Tuesday to lower the counter-cyclical capital buffer. Some analysts, at Morgan Stanley for example, see Lloyds and RBS as the biggest beneficiaries of a lower buffer.

But Morgan Stanley added that while the BoE action provides reassurance that it will aim to avoid pro-cyclical tightening of capital standards, they remain concerned about the outlook for UK bank earnings and are most cautious on earnings for RBS, Barclays and Clydesdale (CYBG).

These three were all held at an 'equalweight' rating "as slower UK macro looks set to delay improvement in returns with limited prospects for capital return over theshort to medium term". Lloyds is the analysts' only 'overweight' in the sector given they perceive a stronger capital trajectory, more defensive operating profitability and expect a 6% 2017 dividend yield.

Housebuilders Barratt Developments, Taylor Wimpey were down as despite neutral recent trading updates from UK house builders Persimmon and Redrow and a fall in June construction PMI seen earlier this week.

"While sentiment remains so fragile investors continue to be in “shoot first and ask questions later” mode as banks and house builders continue to get clobbered," said analyst Michael Hewson at CMC Markets.

Market Movers

FTSE 100 (UKX) 6,447.65 -1.49%
FTSE 250 (MCX) 15,565.12 -1.08%
techMARK (TASX) 3,195.83 -0.64%

FTSE 100 - Risers

Fresnillo (FRES) 2,043.00p 7.92%
Randgold Resources Ltd. (RRS) 9,700.00p 4.19%
Mediclinic International (MDC) 1,117.00p 1.55%
Shire Plc (SHP) 4,803.00p 0.86%
Hikma Pharmaceuticals (HIK) 2,563.00p 0.79%
Burberry Group (BRBY) 1,169.00p 0.78%
ITV (ITV) 169.60p 0.41%
SABMiller (SAB) 4,368.00p 0.34%
Paddy Power Betfair (PPB) 7,995.00p 0.00%
Whitbread (WTB) 3,402.00p -0.09%

FTSE 100 - Fallers

Tesco (TSCO) 160.25p -8.82%
International Consolidated Airlines Group SA (CDI) (IAG) 352.30p -6.92%
Morrison (Wm) Supermarkets (MRW) 173.50p -6.62%
Aviva (AV.) 351.00p -6.55%
Royal Bank of Scotland Group (RBS) 149.80p -5.49%
Prudential (PRU) 1,141.00p -5.19%
Barratt Developments (BDEV) 334.30p -4.57%
Taylor Wimpey (TW.) 116.00p -4.37%
Lloyds Banking Group (LLOY) 48.84p -4.28%
Provident Financial (PFG) 2,212.00p -4.08%

FTSE 250 - Risers

Hochschild Mining (HOC) 222.40p 9.72%
Centamin (DI) (CEY) 160.90p 9.46%
Acacia Mining (ACA) 529.50p 6.41%
Vedanta Resources (VED) 445.20p 4.75%
Polymetal International (POLY) 1,131.00p 4.43%
Fidessa Group (FDSA) 2,050.00p 3.48%
Homeserve (HSV) 501.00p 2.35%
Beazley (BEZ) 370.40p 2.15%
Telecom Plus (TEP) 1,017.00p 1.95%
Synthomer (SYNT) 327.00p 1.87%

FTSE 250 - Fallers

Tullow Oil (TLW) 204.10p -15.17%
CLS Holdings (CLI) 1,212.00p -8.53%
Clarkson (CKN) 1,646.00p -8.30%
Aldermore Group (ALD) 103.80p -6.82%
Sophos Group (SOPH) 202.60p -6.51%
Softcat (SCT) 281.10p -6.30%
Allied Minds (ALM) 303.00p -6.02%
Redrow (RDW) 274.60p -5.93%
Thomas Cook Group (TCG) 54.85p -5.84%
Wizz Air Holdings (WIZZ) 1,512.00p -5.50%