FTSE 100 movers: Tesco surges on results; water stocks hit by RBC downgrade

London’s FTSE 100 was down 0.6% to 7,035.20 in afternoon trade.

Supermarket chain Tesco was the standout gainer after it reported much improved sales and operating profits in the first half of the year and set out ambitious plans for growing profit margins, though its pension deficit soared to a whopping £6bn.

UK like-for-like sales doubled to 0.6% and operating profits grew 38.4% to £515m as chief executive Dave Lewis continued to turn around the supermarket colossus, which he plans accelerate with a new set of growth "ambitions".

Other retailers followed suit, with Marks & Spencer and Morrisons both firmly in the black.

On the downside, United Utilities and Severn Trent were under the cosh after RBC Capital Markets downgraded both stocks as it took a look at the UK water sector.

The bank cut Severn Trent to ‘underperform’ from ‘sector perform’ on valuation grounds but lifted the price target to 2,300p from 2,200p.

It downgraded United Utilities to ‘underperform’ from ‘sector perform’, also on valuation, noting 4% implied total return, but lifted the price target to 1,000 from 975p.

The Canadian banks said its ratings on both stocks reflect its view that their current trading valuation implies a total return that compares unfavourably to the rest of the European utilities sector.

Commercial property and development and investment company Land Securities was also on the back foot as Societe Generale put out a note reiterating that Brexit will be a long and painful process that will damage the UK economy and inevitably hurt the property sector.

The note followed a briefing session from TheCityUK and Land Securities’ investors day on Friday.

“The balance has switched in favour of the tenant. Rent-free periods are on the rise (by two to six months, according to LAND) and while headline rents are holding well so far, net effective rent is falling,” SocGen said.

Risers

Tesco (TSCO) 214.65p 13.75%
Marks & Spencer Group (MKS) 338.50p 2.92%
Anglo American (AAL) 1,011.00p 2.50%
Morrison (Wm) Supermarkets (MRW) 225.80p 2.36%
Standard Chartered (STAN) 660.40p 1.66%
Prudential (PRU) 1,431.00p 1.60%
easyJet (EZJ) 1,004.00p 1.41%
Burberry Group (BRBY) 1,440.00p 1.41%
Royal Dutch Shell 'B' (RDSB) 2,118.00p 0.98%
Barclays (BARC) 170.70p 0.86%

Fallers

United Utilities Group (UU.) 962.00p -3.27%
Polymetal International (POLY) 898.50p -3.18%
Intu Properties (INTU) 292.10p -2.89%
Travis Perkins (TPK) 1,566.00p -2.61%
Severn Trent (SVT) 2,436.00p -2.40%
Land Securities Group (LAND) 1,030.00p -2.28%
Provident Financial (PFG) 3,249.00p -2.14%
Randgold Resources Ltd. (RRS) 7,175.00p -2.11%
Worldpay Group (WI) (WPG) 296.90p -2.08%
Compass Group (CPG) 1,517.00p -2.00%