Sector movers: Goldman boosts grocers, Deutsche wary on steel

Gains for Sainsbury and Tesco saw grocers rise to the top of the leaderboard following upwards price target revisions out of Goldman Sachs, although the underlying commentary was somewhat less than flattering.

The broker removed Sainsbury from its 'Conviction' sell-list, 'promoting' its shares to a simple 'sell' and improved their target on the same from 178p to 195p.

In parallel, its analysts nudged higher their targets for Tesco from 142p to 145p and for Morrisons from 175p to 180p.

"With 31% and 21% downside to our PTs, respectively, we remain Sell rated [on Tesco and Morrison]. On Sainsbury, we continue to forecast further margin declines in its core grocery business and anticipate falling EBIT at Argos as competition steps up and FX hurts gross margins. However, with 20% downside, less than for peers, we remove the stock from the Conviction List, but remain Sell," analysts Rob Joyce, Simran Dhaliwal and Natasha de la Grense said in a research report sent to clients and dated 25 October.

Tobacco was at the bottom of the pile, as stock in British American Tobacco slumped, with analysts moving to price-in the likelihood that Reynolds American would seek a higher take-over offer.

Analysts at JP Morgan said Reynolds was likely to ask for $59 a share, for a 4% increase on its suitor´s initial offer, with a potentially higher cash component.

That would mark a 25% premium over the company´s undistrubed share price.

Evraz shares came off after flirting with their 52-week high earlier in the session on the back of recent sharp volatility in the prices of several key steel-making ingredients.

Nevertheless, analysts at Deutsche Bank could be heard sounding a cautious note, telling clients: "Volatility in steel equities continues to be driven by macro woes/commodity price movements. Although prices recovered after last year’s crunch, our Chinese team sees little evidence of a true demand recovery.

"We believe coal prices provide cost support for now, but we still see a price correction risk. Thus, progress on anti-dumping policy and overcapacity removal remain key in the long term."

Top performing sectors so far today
Food & Drug Retailers 3,127.61 +0.94%
Food Producers & Processors 7,703.99 +0.21%
Electricity 9,251.85 +0.03%
Alternative Energy 0.00 0.00%
Alternative Investment Instruments NULL 0.00%

Bottom performing sectors so far today
Electronic & Electrical Equipment 5,031.35 -2.41%
Tobacco 53,888.95 -2.38%
Oil Equipment, Services & Distribution 16,210.44 -2.36%
Technology Hardware & Equipment 1,022.78 -2.22%
Chemicals 12,543.24 -2.09%