Sector movers: Food retailers bought, oil stocks see profit taking

Food retailers led UK stocks higher on Wednesday amid a report about improving shop prices and a strong update from wholesaler and convenience store owner Booker.

Although the BRC-Nielsen shop price index revealed overall shop price deflation eased to 0.3% in June from the 0.4% drop in May, food inflation persisted.

Food prices rose 1.4% in June as they did the previous month, with fresh food prices up 1.4% in June, 0.2 percentage points higher than in May and the highest increase since February 2014, while ambient food inflation softened to 1.% from the 1.8% increase in May.

Booker reported growth in like-for-like sales in the first quarter thanks to the late Easter and favourable weather, boosting Tesco, which is currently awaiting regulatory permission to take over the wholesaler.

Broker Shore Capital said food inflation was "more of a positive than negative feature of the investment case for the supermarket segment".

However, ShoreCap was cautious on Booker even though acknowledging the wholesale's quarterly performance was outstanding and ordinarily would have driven upgrades and a demonstrably positive share price reaction.

"However, the decision to merge with Tesco, one of the worst performers in the FTSE-100 in CY2017, means that the Booker share is now a function of the supermarket chain. So, recovery, deleverage and negative sentiment to Amazon-Whole Food Markets is controlling Booker’s share price as well as Tesco’s. In time this may work through if the CMA grants approval for the merger.

"However, if the CMA puts forward unpalatable remedies to Tesco then the de-rating risk to Booker could be considerable."

Oil services and producers were the main fallers as futures prices came under selling pressure following news that Opec had increased its production, with price movements being exaggerated due to the simmering geopolitical tensions around Qatar.

Having surged the previous day, front month Brent crude futures were down 3.3% to $48.0 a barrel on the ICE as of 1600 BST , while WTI was down 3.7% at $45.32.

Opec increased its oil exports for a second month in June, despite a pledge from its members to rein in their production until March 2018 in order to keep prices higher.

According to Thomson Reuters Oil Research, the cartel exported 25.92m barrels per day last month.

That was 450,000 b/d above May's level and 1.9m b/d more than a year earlier.

Big fallers included Royal Dutch Shell, BP, Centrica, Tullow Oil, Petrofac and Amec Foster Wheeler.

Top performing sectors so far today

Food & Drug Retailers 2,897.63 +3.02%

Financial Services 10,461.95 +1.30%

Electronic & Electrical Equipment 5,821.46 +1.18%

Construction & Materials 6,829.37 +1.17%

Tobacco 57,577.11 +1.08%

Bottom performing sectors so far today

Oil Equipment, Services & Distribution 12,100.38 -1.37%

Oil & Gas Producers 7,523.03 -1.29%

Industrial Metals & Mining 2,535.71 -0.97%

Electricity 8,590.87 -0.59%

Fixed Line Telecommunications 3,360.08 -0.35%