Market update - 22 December
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Your support makes all the difference.The FTSE 100 was on 28.96 points at 4257.97 and the FTSE 2350 retreated to 6193.92, down 91.18 points, at 11.22 am this morning.
The retail sector underperformed amid growing concern about the impact of the current wave of discounting, and the prospect of a drop off in demand when prices return to normal in January.
“The bounce in sales, from those depressed levels seen in October/ November comes as a great relief for many of the struggling retailers on the high street. However, it should be noted that the margin performance this year could well be the worst on record with researchers in to discounting indicating that 82 per cent of the 100 largest retailers were all discounting before Xmas,” analysts at Singer Capital Markets said in a note to clients this morning,
“Although the issue of a stock problem emerging after Xmas is diminished (with only savage discounting of 75 per cent or more likely to clear any overhands thereafter) we continue to believe that a reversion to normal discretionary times will leave retailers’ sales back at very depressed levels again (i.e. October/November levels). Most retailers interviewed in the press agree that this will be the case. This reversion to trend remains a concern for forecasts… Insolvency specialists Begbies Traynor suggest that 10-15 national chains will fail before mid-January, with [the] quarterly rent [that is due] this week posing a major obstacle to many more.”
The concerns pushed Home Retail Group to the bottom of the FTSE 100, down 11.09 per cent or 26p at 208.5p. On the second tier, Kesa Electricals lost 5.73 per cent or 5p to 82.25p and Debenhams was down 5.66 per cent or 1.5p at 24p.
Moving up
Lonmin gained 6.06 per cent or 48p to 839.5p. Investors moved to capitalise on recent losses as the stock began trading on the FSTE 250.
Moving down
Engineering group IMI lost 7.63 per cent or 22.5p to 272.5p after Citigroup downgraded the stock to “hold” from “buy” in a new sector review.
“Weighed down by economic concerns post a multi year boom, UK Engineers’ shares prices roughly halved in 2008. However, performance was not dramatically out of line with our wider pan-European coverage group,” the broker said, adding:
“While valuation is attractive, history suggests that a sustained rally is not likely to be achieved before earnings forecasts [reach bottom]. Given that in most cases we are only a few months into [earnings] downgrades, we do not see certainty in an [earnings] trough before the second half of 2009 at the earliest.”
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