FTSE 100 down 1.5% on the week despite oil firms late recovery

6th December 2013

Oil firms led the FTSE higher on Friday after HSBC gave several energy giants overweight ratings but the FTSE market was still down 1.5% on the week.

The broader index recovered from five days of falls, following on positive US employment data on Friday lunchtime, despite the fact that the news is likely to bring the taper closer. On Thursday, the market had hit its lowest level since mid-October.

Many retailers were down following a sceptical report about the sector from Credit Suisse. The bank said that while 2013 has been a “remarkable year” for general retail stocks, it has also been a year of high single-digit downgrades across the sector, “leaving valuations quite stretched with UK retail trading at almost 15 times 12-month forward earnings”.  M&S shares were down 0.96% at 469.77p after being singled out in the report, before recovering to 470.70p. Other retail stocks such as Debenhams, Halfords, Carpetright, Next and Kingfisher also fell.

Tesco had a difficult week with sales falling in UK sales by 1.5% in third quarter, with Ireland plummeting 8.1%, the rest of Europe down 4% and Asia off 5.1%. Retail analyst Dave McCarthy at HSBC said: “There was no good news in the statement, only confirmation that things are as bad as expected and worse in some instances.”

John Ibbotson of consultants Retail Vision suggests that the job of Tesco chief executive Philip Clarke in place since 2011 may be on the line, as Tesco struggles to compete at both the premium and cut price ends of the retail markets. Most other analysts were more supportive.

The shares ended the week on 332.90p down 4.33%.

Oilfield services group Petrofac rebounded on Friday, a day after heavy falls on concerns about guidance at its investor day on Thursday. It closed the week on 1,194p.

“Having hit a two-year low yesterday on rumours that management was reducing long-term earnings forecasts, Petrofac has been besieged by bargain-hunters this morning,” said Brenda Kelly from IG.

Oil companies Royal Dutch Shell and BHP Billiton were the top risers on the FTSE 100 on Friday.

Shell rose on its decision not to go ahead with the proposed 140,000 a day gas-to-liquids (GTL) project in the Gulf of Mexico. It said it would suspend any further work on a project that could have cost £20bn . Andrew Whittock at Liberum Capital said the project had not fitted with the firm’s strict rules on capital discipline.

HSBC also gave Shell an overweight rating. The shares finished the week at 2,065.50p.

Standard Chartered fell around 8% to 1,331.4p on the week. The Asia-focused bank warned that profits would be flat on 2013, after difficult market conditions in the second half of the year.

In the FTSE 250, upmarket housebuilder Berkeley unveiled a near 20% jump in half-year profits and said it was building more homes than at any time since the 2008 financial crash.

Shares rose more than 11% to £2540p an all-time high on news it would pay an interim dividend of 90 pence per share in January 2014. The shares closed the week at £24.98.08p.

Berkeley said it was broadly supportive of government plans to levy capital gains tax on sales by overseas buyers but said continued tinkering would eventually undermine the market.

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