FTSE 100 movers: Tesco surges on rival's unexpected positive results

The FTSE 100 continued to recover some of its losses from the start of the year, rising 107.03 points (1.82%) to 5,978.86 by mid-afternoon Tuesday.

Tesco led the risers ahead of its Christmas and third quarter trading update out on Thursday, following an unexpectedly solid Christmas trading update from Morrison’s.

Like-for-like (LFL) sales were up 0.2% in the nine weeks to 3 January, miles better than the 2% decline predicted by analysts, with LFL sales including fuel down 0.6% over the period. Revenues were helped by LFL transaction numbers in core supermarkets up 1.3% on the same period last year and online grocery sales nearly doubling.

With deflation of 3.2% recorded, this implied same-store volume growth of nearly 3.5%, with the feeling that the stories are beginning to attract customers back.

Interestingly, industry data from Kantar Worldpanel on Tuesday showed the effect on group sales of store closures, with a 2.6% decline in sales over a 12-week period to 3 January. That same survey claimed Tesco saw sales fall 2.7%, better than the 3.4% fall of a month ago, but its market share declined to 28.3%.

Anglo American shares also surged after the company finally completed the exit from its Tarmac joint venture, with the sale of assets in the Middle East to a subsidiary of French engineering and construction group Bouygues.

The lengthy sale process began after the miner sold off its 50% ownership interest in Lafarge Tarmac to Lafarge in July. The final joint venture operations were in the United Arab Emirates, Oman and Qatar, while sale of another non-operating joint venture entity in Oman is also pending. Anglo's disposal plans are at the heart of its attempts to slash its workforce from 135,000 last year to less than 50,000 people.

Shire rebounded from Monday’s losses after Credit Suisse upped the stock to ‘outperform’ from ‘neutral’, following the proposed merger with US peer Baxalta. The company announced on Monday that it had agreed a $32bn takeover of Baxalta, which saw shares tank.

Credit Suisse said the deal provides a solid strategic fit and mitigates the significant generic risk at Shire from drugs such as Vyvanse, Lialda and Firazyr, at the end of the decade. It said the combined group will be a leader in rare diseases with strong positions in haematology, lysosomal storage diseases and immunology.

In addition, it said Baxalta's position in haematology complements Shire's hereditary angioedema franchise and should provide cheaper manufacturing options for best-selling drug Cinryze over time. The bank believed the negative reaction to the deal on Monday reflects investor concerns on haemophilia completion, the integration of Baxalta’s employees and Baxalta’s $8bn IRS tax overhang from the spin-out of Baxter.

Of the relatively few fallers of the day, BAE Systems flew a bit lower after Monday’s surge when JP Morgan Cazenove upgraded it from ‘neutral’ to ‘overweight’.

The bank said it believes 2016 will be a big year for defence stocks, citing a major escalation in geo-political tensions as well as it being a “safe haven” as concerns grow about the global economy. It said there were four key positives for the sector, including the rise in US and European defence spending due to the Middle East, the related refugee crisis and Russia’s foreign policy when it comes to Ukraine and Syria. JP Morgan Cazenove also said the stronger US dollar is a positive to UK defence companies.

FTSE 100 - Risers

Tesco (TSCO) 155.65p 7.01%
Anglo American (AAL) 245.00p 6.31%
Shire Plc (SHP) 4,134.00p 5.32%
GKN (GKN) 289.90p 4.02%
Pearson (PSON) 709.50p 3.96%
Sports Direct International (SPD) 418.00p 3.72%
Old Mutual (OML) 161.10p 3.53%
BT Group (BT.A) 478.55p 3.36%
Berkeley Group Holdings (The) (BKG) 3,655.00p 3.31%
Mondi (MNDI) 1,255.00p 3.12%

FTSE 100 - Fallers

BAE Systems (BA.) 523.00p -0.66%
Travis Perkins (TPK) 1,925.00p -0.26%
DCC (DCC) 5,340.00p -0.09%
Inmarsat (ISAT) 1,106.00p -0.09%
Aberdeen Asset Management (ADN) 249.80p -0.04%