FTSE 100 movers: Utilities lead gains, Tesco and Morrison diverge ahead of updates
London's FTSE 100 was making modest gains by Friday afternoon, led by utilities and retailers.
UK energy and water companies were in focus due to a note from Credit Suisse, which the share prices were discounted to harshly compared to European peers as markets are being too cautious on the likely effect of government price caps. Centrica shares were upgraded to ‘outperform’ from ‘neutral’ due to its oversized "risk discount", with the Swiss bank also lifting its rating on United Utilities to ‘neutral’ from ‘underperform’ as its shares were seen as having fallen below fair value.
Retailers were bouncing back after being hit by the profit warning from Debenhams a day earlier, with much of the department store group's promotional problems seen to be company-specific. Next, whose update earlier in the week had woven some threads of optimism into its outlook statement, Marks & Spencer and Primark-owner Associated British Foods were all on the leaderboard.
This came even though fresh data on high street sales in December showed a 2.3% fall on the previous year, with clothing and footwear suffering the most.
Defensives like healthcare and drugs groups Smith & Nephew, GlaxoSmithKline and NMC Health were all among the risers too, with a similar trend seen on continental bourses too.
The biggest faller was Admiral, after JP Morgan Cazenove said an expected shifting pricing backdrop in 2018 changed its opinion on Admiral and some other in the sector. Admiral was downgraded to 'underweight' from 'neutral' partly on valuation but also on a more cautious view on the motor pricing cycle, with the company expected to find it difficult to improve its industry-leading margins and a likelihood of some erosion in a more competitive motor market.
Ahead of post-Christmas trading updates next week, Tesco was down almost 1%, but Morrisons up 1%.
Tesco's recent progress on reducing costs and improving operating margins and cash generation has been good, said Laith Khalaf at Hargreaves Lansdown. "Next week may only be quarterly results, but the Christmas period means Q3 is the most important quarter of the year. A good performance next week will raise hopes Tesco can meet those medium-term targets, and in turn lift expectations the dividend can increase meaningfully sooner rather than later." But with its shares up more than 18% since the start of November, investors were booking some profits just in case.
Morrisons, meanwhile has been flat since the start of November, but has rebounded from a 12-month low in the middle of that month. UBS said of the Big Four retailers it faces the toughest Christmas comparatives "and, we think, the immediate takeaway is of downside risk to consensus Christmas sales estimates".
Market Movers
FTSE 100 (UKX) 7,705.20 0.12%
FTSE 250 (MCX) 20,895.66 0.36%
techMARK (TASX) 3,573.76 0.31%
FTSE 100 - Risers
Centrica (CNA) 145.85p 2.86%
United Utilities Group (UU.) 815.20p 1.93%
Next (NXT) 4,839.00p 1.92%
Smith & Nephew (SN.) 1,278.50p 1.67%
Marks & Spencer Group (MKS) 313.50p 1.52%
GlaxoSmithKline (GSK) 1,359.00p 1.45%
Associated British Foods (ABF) 2,883.00p 1.44%
Reckitt Benckiser Group (RB.) 6,785.00p 1.37%
NMC Health (NMC) 3,120.00p 1.30%
Halma (HLMA) 1,281.00p 1.18%
FTSE 100 - Fallers
Admiral Group (ADM) 1,867.00p -3.19%
Barclays (BARC) 202.00p -1.22%
Mediclinic International (MDC) 625.10p -1.15%
Tesco (TSCO) 209.40p -0.85%
Rio Tinto (RIO) 3,954.50p -0.80%
BAE Systems (BA.) 570.80p -0.56%
Antofagasta (ANTO) 980.80p -0.55%
BHP Billiton (BLT) 1,553.80p -0.54%
Mondi (MNDI) 1,928.50p -0.52%
Aviva (AV.) 506.00p -0.51%