London close: Supermarkets lead equities into positive territory

Shares in Morrisons gained after the grocer delivered like-for-like (LFL) sales growth of 0.2% in the nine weeks to 3 January, well ahead of the 2% decline predicted by analysts. Revenues over the Christmas period were helped by LFL transaction numbers in core supermarkets up 1.3% on the same period last year and online grocery sales up almost 100%.

Tesco, J Sainsbury, Marks & Spencer and Ocado Group advanced following the update.

Investors seemed to shrug off figures from Kantar Worldpanel showing sales in the British grocery market fell 0.2% in the 12 weeks to 3 January, due to the ongoing supermarket price war amid fierce competition.

Sainsbury’s was the best performer with sales up 0.8% during the period while Tesco, Asda, and Morrison’s saw sales declines of 2.7%, 3.5% and 2.6%, respectively.

Separate disappointing figures on retail sales from BRC-KPMG also didn’t seem to bother the market. UK retail sales were flat in December, with a 0.1% like-for-like increase and total sales up 1.0%, the report showed.

In contrast, a report from Nielsen revealed consumers spent £3.3bn in the week to Boxing Day, up 8% on the same period a year ago. Supermarket sales during Christmas week were 43% higher than in an average week, when around £2.3bn is spent, Nielsen said.

Helping to lift sentiment elsewhere, China’s central bank set the yuan firmer on Tuesday.

The People’s Bank of China set the mid-point for the yuan at 6.5628 per dollar, just two pips weaker than the previous strong fix and firmer than its spot levels late on Monday. The spot yuan weakened from its overnight close to 6.5733 to the dollar, but offshore it strengthened as much as 180 pips to 6.5660.

“This recovery in the offshore yuan could well be enough to help put a floor under stock markets in the short term, as US markets managed to stabilise yesterday despite posting new multi week lows during the day,” said Michael Hewson, chief market analyst at CMC Markets.

On the economic data front, UK industrial production rose 0.9% in November from the same month a year ago, missing expectations for a 1.7% rise. Manufacturing output fell 1.2% year-on-year in November, more than the 0.8% dip that was anticipated by analysts.

Job openings in the US nudged higher in November, according to data released by the Bureau of Labor Statistics. Openings came in at 5.43m from 5.34m in October and compared with economists’ expectations for a 5.41m reading. The figure was down from a record 5.7m in July but up 11% on the previous year.

The NFIB's index of US small business optimism edged higher in December by 0.4 points to 95.2, but remained "well below" the gauge's 42-year average of 98.0.

Meanwhile, oil prices swung between falls and gains throughout the day. At 1713 GMT Brent crude fell 2.8% to $30.67 per barrel and West Texas Intermediate dropped 3.5% to 30.32 per barrel.

“The overwhelming supply and demand equation that has encouraged dramatic selling is going nowhere anytime soon, with a persistent aggressive oversupply in the markets consistently haunting investor attraction, while weaker forecasts around global growth weighs on demand, and it is likely that more global economic downgrades from major institutions are to follow early this year,” said FXTM chief market analyst Jameel Ahmad.

In corporate stocks, Debenhams rallied after saying like-for-like sales were up 1.9% in the 19 weeks to 9 January, comfortably beating expectations for a 0.1% drop and better than last year’s 0.8% decline.

BHP Billiton slumped after HSBC downgraded the stock to ‘reduce’ from ‘hold’ and cut the price target to 590p from 1,100p saying the company faces further headwinds from oil and iron ore.

Premier Oil plunged after Jefferies cut its rating on the stock to ‘hold’ from ‘buy’ and slashed the target price to 33p from 120p. “The near-term outlook for the oil market is bleak as global over-supply continues,” said analyst Mark Wilson.

Greggs declined after Shore Capital downgraded the company from ‘buy’ to ‘hold’ despite posting a 5.2% rise in sales for the 52 weeks to 2 January 2015. Shore Capital noted the company’s warning about the National Living Wage which comes into effect this year, and downgraded the stock on valuation grounds.

Anglo American shares jumped 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.

Shire rebounded from Monday’s losses after Credit Suisse upped the stock to ‘outperform’ from ‘neutral’, following the proposed merger with US peer Baxalta.

Market Movers

FTSE 100 (UKX) 5,928.97 0.97%
FTSE 250 (MCX) 16,688.51 0.18%
techMARK (TASX) 3,152.47 0.83%

FTSE 100 - Risers

Tesco (TSCO) 155.20p 6.70%
Shire Plc (SHP) 4,101.00p 4.48%
Berkeley Group Holdings (The) (BKG) 3,663.00p 3.53%
GKN (GKN) 288.40p 3.48%
Sainsbury (J) (SBRY) 251.20p 3.25%
Mondi (MNDI) 1,256.00p 3.20%
Experian (EXPN) 1,133.00p 2.91%
ARM Holdings (ARM) 980.00p 2.83%
Johnson Matthey (JMAT) 2,543.00p 2.54%
Barratt Developments (BDEV) 609.50p 2.52%

FTSE 100 - Fallers

Randgold Resources Ltd. (RRS) 4,189.00p -3.72%
Antofagasta (ANTO) 374.10p -3.51%
BHP Billiton (BLT) 617.90p -2.86%
Rio Tinto (RIO) 1,652.00p -2.65%
Aberdeen Asset Management (ADN) 244.30p -2.24%
BP (BP.) 323.05p -1.52%
Glencore (GLEN) 72.40p -1.40%
BAE Systems (BA.) 522.00p -0.85%
Royal Dutch Shell 'B' (RDSB) 1,349.00p -0.44%
InterContinental Hotels Group (IHG) 2,515.00p -0.40%

FTSE 250 - Risers

Debenhams (DEB) 76.15p 15.38%
Vedanta Resources (VED) 233.60p 12.52%
Jimmy Choo (CHOO) 135.00p 10.02%
Morrison (Wm) Supermarkets (MRW) 165.90p 8.93%
Jupiter Fund Management (JUP) 438.00p 4.41%
Galliford Try (GFRD) 1,527.00p 4.30%
B&M European Value Retail S.A. (DI) (BME) 255.80p 3.27%
Saga (SAGA) 204.30p 3.08%
Intermediate Capital Group (ICP) 583.50p 2.91%
Pets at Home Group (PETS) 255.70p 2.57%

FTSE 250 - Fallers

Greggs (GRG) 1,049.00p -14.37%
Michael Page International (MPI) 410.80p -8.02%
Tullow Oil (TLW) 123.10p -7.23%
Hays (HAS) 121.20p -6.70%
TalkTalk Telecom Group (TALK) 189.50p -6.00%
Acacia Mining (ACA) 171.50p -5.87%
Indivior (INDV) 169.20p -5.69%
Cairn Energy (CNE) 127.80p -5.05%
Ophir Energy (OPHR) 81.45p -4.68%
Nostrum Oil & Gas (NOG) 340.20p -4.38%